How to Positively Gear an Investment Property in Australia
Dreaming of an investment that pays you every month? That’s the power of a positively geared property. It can provide a steady stream of passive income, which can help support your cash flow.
This guide will walk you through exactly how to positively gear an investment property. We’ll cover the core concepts, the essential calculations, and actionable strategies to turn your property investment goals into a cash-flow-positive reality. Whether you’re in Sydney, a regional town, or an Aussie expat looking to invest back home, this is your starting point.
What Does It Mean to Positively Gear a Property?
A positively geared property is one where your total rental income is greater than all your expenses.
This means the property generates a profit for you before you even consider tax deductions.
You are essentially earning more from your tenant than you are spending to hold the asset.
This extra cash flows directly into your bank account, creating a passive income stream.
It’s the opposite of negative gearing, where your expenses are higher than your rental income, resulting in a loss that can be used to offset your taxable income.
To help you understand the difference, here’s a simple comparison:
| Feature | Positive Gearing | Negative Gearing |
|---|---|---|
Cash Flow | Positive (Income > Expenses) | Negative (Expenses > Income) |
Primary Goal | Generate regular income. | Achieve long-term capital growth. |
Tax Impact | Profit is added to your taxable income. | Loss can reduce your taxable income. |
Investor Focus | Cash flow for lifestyle or reinvesting. | Asset appreciation over time. |
Understanding this distinction is the first step in learning how to positively gear a property successfully.
👉 Learn more: Negative Gearing vs Positive Gearing
The Core Formula: Calculating Your Gearing Position
You must know your numbers to achieve positive gearing.
The calculation itself is straightforward: you need to ensure your income surpasses your outgoings.
The core principle is simple. If the total money coming in from rent is more than the total money going out for expenses, your property is positively geared.
The key is to account for all potential costs, not just the obvious mortgage repayment.
Here is the formula:
Total Annual Rental Income>Total Annual Property Expenses
Your total expenses include a range of costs. Be sure to factor in:
- Loan interest repayments
- Principal loan repayments (if you have a P&I loan)
- Council rates
- Water rates
- Strata or body corporate fees
- Landlord insurance
- Property management fees (typically 5-10% of rent)
- Repairs and maintenance budget (a buffer of 1-2% of the property value annually is wise)
- Land tax (if applicable)
- Other costs like pest control, smoke alarm servicing, etc.
Example Calculation:
Let’s imagine you buy a property for $450,000.
| Income / Expense Item | Annual Amount | Notes |
|---|---|---|
Total Rental Income | $28,600 | $550 per week x 52 weeks |
Mortgage Repayments | $21,600 | Based on a $360k loan at 6% p.a. interest-only |
Council & Water Rates | $2,000 | Estimate |
Landlord Insurance | $1,200 | Estimate |
Property Management | $2,288 | 8% of rental income |
Maintenance Buffer | $1,500 | Buffer for unexpected repairs |
Total Annual Expenses | $28,588 | |
Pre-Tax Cash Flow | +$12 | Income > Expenses = Positively Geared |
This example uses general information only. It does not take into account your personal circumstances. Speak to a mortgage or tax specialist to get tailored advice.
👉 Check out: Negative Gearing Investment Property to Unlock Lucrative Benefits
7 Actionable Strategies for How to Positively Gear an Investment Property
Achieving a positively geared property rarely happens by accident.
It requires a deliberate and strategic approach to buying, financing, and managing your asset.
You can actively influence both sides of the gearing equation—your income and your expenses.
By focusing on maximising rent and minimising costs, you can create a cash-flow-positive investment from day one or turn a currently neutral or negative property into a profitable one.
Here are seven strategies to help you get there.
1. Maximise Your Rental Yield
Your rental yield is the engine of your cash flow. A higher yield makes it significantly easier to cover your expenses and achieve a profit.
You can boost your property’s appeal to secure a higher rent.
Simple cosmetic renovations like a fresh coat of paint, new carpets, or modernising light fixtures can make a huge difference.
Adding in-demand features like air conditioning, a dishwasher, or built-in wardrobes can also justify a higher rental price.
Research your target market; if you’re near a university, offering an all-inclusive, furnished option could significantly boost your income and help you positively gear a property.
2. Secure a Favourable Mortgage
Your home loan is almost always your single biggest expense. Securing the right loan structure and a competitive interest rate is critical.
A lower interest rate directly reduces your monthly repayments, pushing you closer to positive gearing.
Don’t just accept the first offer from a bank. Compare rates from multiple lenders and consider using a mortgage broker who can access a wider range of products.
Also, consider an interest-only loan period, which can lower initial repayments to improve cash flow, though this means you won’t be paying down the loan principal.
This strategy requires careful consideration of your long-term goals. Getting this right is a key part of how to positively gear an investment property.
3. Start with a Larger Deposit (And More Equity)
The amount of money you borrow has a direct impact on your expenses. The less you borrow, the smaller your repayments will be.
This is where the idea of how much equity to positively gear comes into play.
By providing a larger deposit (e.g., 30% or more), you reduce your Loan-to-Value Ratio (LVR).
A smaller loan means smaller repayments, making it much easier for your rental income to exceed your costs.
A deposit of over 20% also helps you avoid Lenders Mortgage Insurance (LMI), a significant upfront cost that adds no value to your property.
👉 Check out: Should You Save a Larger Deposit for Your Australian Home?
4. Target High-Yield Locations
The right location is everything in property investing.
For positive gearing, you want areas where property prices are affordable but rental demand is strong.
Look beyond the major capital city centres. Regional hubs, university towns, or suburbs with new infrastructure projects (like hospitals or transport links) often offer higher rental yields.
These locations provide strong rental returns relative to their property values.
Use online data sources to research rental yields by suburb and identify areas where demand outstrips supply, which is a great strategy for how to positively gear a house.
👉 Check out: Australian Housing Market in 2025
5. Choose the Right Property Type
The type of dwelling you purchase can greatly influence its income potential.
Some property types are naturally geared towards higher cash flow.
For instance, a property with a granny flat or a dual-key apartment allows you to generate two separate rental incomes from a single title.
This can dramatically increase your total income.
Similarly, units and townhouses often have lower purchase prices and maintenance costs than standalone houses, making it easier to get the numbers to work in your favour.
Always weigh up factors like strata fees, as these are an ongoing expense you must cover.
6. Minimise Your Ongoing Expenses
Every dollar you save on expenses is a dollar that goes straight to your bottom line.
Actively managing your outgoings is a non-negotiable part of the process.
While using a property manager is often wise, you could consider self-managing if you have the time and expertise, saving you 5-10% of your rental income.
Regularly review your landlord insurance policy to ensure you have adequate cover at a competitive price.
Most importantly, focus on preventative maintenance. Fixing a small leak today is much cheaper than repairing major water damage later.
👉 Try: Budget Planner
7. Understand the Tax Implications
While positive gearing is about pre-tax profit, understanding your tax situation is vital.
A positive cash flow will increase your taxable income.
The profit you make from your investment property is considered income and will be taxed at your marginal tax rate.
However, you can still claim deductions for certain non-cash expenses, like the depreciation of the building and the assets within it (known as a depreciation schedule).
These deductions can reduce your overall tax bill while you still enjoy positive cash flow in your pocket. It’s crucial to get professional advice to structure everything correctly.
👉 We can help you with your Australian Tax Return Preparation.
Is Positive Gearing Always the Best Strategy?
Positive gearing is an excellent strategy for generating income, but it’s not the only path.
Your personal financial goals should determine your investment strategy.
The primary trade-off is often between cash flow and capital growth. Properties in prime, high-demand suburbs might have lower rental yields and be negatively geared initially, but they often experience stronger capital growth over the long term.
A positively geared property in a regional area might provide great cash flow now but see slower price appreciation.
| Strategy Focus | Best Suited For | Main Advantage | Main Consideration |
|---|---|---|---|
Positive Gearing | Investors seeking regular income. | Provides immediate, passive cash flow. | May have lower long-term capital growth. |
Negative Gearing | High-income earners seeking growth. | Potential for significant capital growth & tax benefits. | Requires you to fund the cash flow shortfall. |
Ultimately, the best strategy is the one that aligns with your circumstances, risk tolerance, and long-term financial plan.
Next Steps: Your Path to a Positively Geared Property
You now have the knowledge and strategies to pursue a cash-flow-positive investment.
The journey involves careful planning, thorough research, and smart financial decisions.
To summarise your key steps:
- Define Your Goal: Decide if income is your primary objective.
- Do the Maths: Learn to accurately calculate potential gearing.
- Research Locations: Find high-yield, high-demand areas.
- Structure Your Finance: Aim for a large deposit and a competitive loan.
- Manage Smartly: Keep a close eye on your income and expenses.
FAQs about How to Positively Gear an Investment Property in Australia
How much deposit do I need to positively gear a property?
There’s no single magic number, as it depends on the property’s price, rent, and interest rates.
However, a larger deposit of 20-30% or more makes it significantly easier.
This reduces your loan size and repayments, which is the biggest hurdle to achieving positive cash flow.
Can I turn my negatively geared property into a positively geared one?
Yes, absolutely. You can do this over time by paying down your loan principal (which reduces your interest costs), increasing the rent in line with the market, or refinancing to a lower interest rate.
A small renovation to justify a rent increase can also help tip the scales.
Do I pay more tax on a positively geared property?
Yes, the net profit from your positively geared property is added to your assessable income for the year, and you will pay tax on it at your marginal rate.
However, remember that this is a tax on a profit you’ve already made, which is a good problem to have.
Is it better to have an interest-only or principal and interest loan for positive gearing?
AU Expats—Ready to Build Your Income Stream?
- Getting expert advice is the smartest way to start. A personalised strategy session with a qualified mortgage and financial specialist can help you assess your borrowing power, analyse potential properties, and build a plan tailored to your goals.
- Book a consultation with our property finance experts today and discover how you can make positive gearing a reality.
- Contact Our Expat Specialist Today
See What You Qualify For
Get Immediate Insights on Your Mortgage Eligibility Discover your mortgage eligibility instantly"*" indicates required fields
