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You are here: Home > Our Services > Wealth Creation > Negative Gearing
Perhaps you’ve heard the somewhat confusing term, “negative gearing”, but are unsure of its meaning. We have extensive experience in this field, and we offer it as a special wealth-creation service. Here’s a brief outline of what it’s all about.
What is negative gearing? It’s a wealth creation strategy, involving the purchase of an investment on borrowed money. However, instead of the usual situation, where your income from the purchase will exceed the interest you pay on the loan, the opposite applies. In negative gearing, the interest you pay is greater than the income generated by the investment.
When does negative gearing result in a profit? When the value of your investment increases enough to result in a tax-free capital gain that exceeds the annual loss.
What sort of assets should I apply negative gearing to? We recommend residential property as the safest option.
Is negative gearing a good plan for everyone wanting to create wealth? Definitely not. At Patel Pike, we only recommend negative gearing as an option if your income is sufficiently high. This is so that, should you find yourself in a situation where you receive absolutely no income from the asset, you are still able to fund the loan from other sources. We do not advocate foolish risks.
Negative gearing can be a positive move.
Contact us today on 09 377 4238 or email patelpike@patelpike.co.nz and find out more.
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