See how the increase in the value of the property per week is much larger than the amount the investor is putting in to top it up.

So, put simply, property investors can still build their wealth through the property increasing in value.

Why are some properties negatively-geared, while others aren't?

In an ideal world, investors could buy a property that:

• Goes up in value quickly
• Pays you income each week
• Doesn’t require a cash deposit

The reality is that you often can’t get all 3 in the same property.

If you are following a buy-and-hold strategy based on New Builds, then you often need to choose two of the following: 

• Capital Growth – The property tends to increase in value faster
• Positive Cashflow – The rent covers the costs (and possibly pays you)
• No Deposit – You borrow all the money to buy it

But you often can’t have all three at once.

Here’s how the trade-off works:

This simple model can help you think through the trade-offs you’re choosing your next property investment.

So if you buy a high-growth property using 100% lending, you’ll typically need to top-up the property.

That’s not because the property is “bad.” It’s because of the choices you’ve made.

6 reasons your property might be negatively-geared

Here are the 6 reasons your property might be negatively geared: 

#1: You haven’t owned it long enough

Rents tend to rise over time, historically around 4 – 5% per year.

If you hold a property long enough, rents often go up faster than all your costs. But in the early years, growth properties often require a top-up.

#2: You’re charging below-market rent

If your rent hasn’t kept up with the market, you might be collecting less income than you could be. This makes your cashflow worse.

This is one of the most common issues investors overlook.

#3: You’re paying principal and interest

If you pay principal and interest on your mortgage, your immediate cash flow will be lower than if you used an interest-only mortgage.

If you’re paying down debt on your investment property, your cashflow will look worse. Even though you’re building equity faster.

#4: Body Corporate or Residents’ Association levies have gone up

Apartments and townhouses can have rising body corporate fees, especially in older buildings.

Large maintenance costs or underfunded long-term maintenance plans can significantly increase annual expenses.

#5: You’ve got a lot of debt

Some investors deliberately take out more loans against their investment property. That could be to have less debt against their family home. 

This can make the investment property negatively geared on paper. But it could improve their overall household cashflow.

#6: You own a growth property. 

Growth properties typically prioritise capital gains over cashflow.

They often have lower yields, which means they’re more likely to be negatively geared.

Is negative-gearing good or bad?

Negative-gearing isn’t automatically good or bad. It’s just a fact of life. 

And it should be said that not every negatively-geared property is a good investment.

Whether it makes sense, or not, for you depends on your strategy, income, and long-term goals.

Here’s when it may, and may not, be the right fit.

So it really depends on what type of investor you ask. 

Investors who favour negative gearing often see it as a long-term play. 

They’re comfortable topping up $100–$150 per week. That’s because they believe the combination of leverage and capital growth can generate strong overall returns.

On the other hand, renovation-focused investors often aim to eliminate top-ups entirely. 

If they can increase rent through improvements, they’d rather hold a property that pays for itself. Especially once they own multiple properties where weekly shortfalls quickly add up.

What about tax? (ring-fencing explained)

In the past, negative-gearing could reduce the tax you paid on your personal income.

Let’s say your property made a $5,000 loss and you earned $100,000 in salary. That loss could reduce your taxable income to $95,000. 

That meant you could get a refund on some of the tax you’d already paid from your job. 

On those numbers an investor might get a $1,650 tax refund. That’s based on a 33% tax rate.

But that changed in 2019.

Today, rental losses are ring-fenced. That means you can’t use property losses to reduce the tax you pay on your salary, business income, or dividends.

Let’s say:

• You earn $10,000 in dividends from a trust
• You lose $10,000 on your rental properties

You might think those cancel each other out. But they don’t.

You still pay tax on the $10,000 dividend income. The property loss can’t offset it.

Instead, that $10,000 rental loss is carried forward.

If, in future years, your property becomes profitable, you can use those carried-forward losses first. They save you tax on those future property profits.

So while you don’t get an immediate tax refund anymore, the losses aren’t wasted. They’re deferred.

Why does this matter for property investors?

Ring-fencing means negative gearing is now primarily a cashflow decision, not a tax strategy.

You won’t get an immediate tax refund to soften the shortfall. You need to be comfortable funding the top-up yourself.

The tax benefit may come later … but not today.

Should I buy a negatively-geared property?

Not every property should (or will) be negatively geared.

Whether it makes sense depends on what you’re trying to achieve.

If your goal is to grow wealth using leverage and take a buy-and-hold approach, negative-gearing is often part of the strategy.

If your goal is stronger cashflow and self-sufficiency, then you’ll need to adjust the strategy. That’s done by focusing on yield, renovating, or contributing a deposit.

At the end of the day, every property investment requires something from you. There’s no universally “right” approach.

The better question is: What are you willing to contribute: cashflow, a cash deposit, or effort?

That answer determines whether negative gearing makes sense for you.