Positive Gearing
INVESTORS GEAR UP POSITIVELY FOR PROPERTY
Now is the time for investors to capitalise on positive gearing opportunities, as rising rents continue to drive rental yields upwards. Rental yields are basically at the point of being equal to or greater than current mortgage rates; this means positive gearing becomes a real opportunity to maximise the returns on investments.
Positive gearing is when a property yields an above average rental return for the purchase price and/or expenses are lower than average. This means your return outweighs your expenses so you have extra money in your pocket each week. The real benefit for investors who positively gear their properties is that the increased income lifts their ability to service more debt.
In today’s property market this means there is the potential for investors to pick up a property at a bargain price, and charge above average rents in return, maximising their return on investment. Also, because they have additional income, they are in a better financial position to secure bank loans.
Recent Australian Property Monitor statistics show asking rents on Australian residential properties increased significantly in the year to March, and that year-on-year growth has been strong and is expected to continue. Rental yields sit at above 8% in Perth, Melbourne, Sydney and Darwin.
As indicated in our recent Property Outlook 2009, rental yields are expected to remain strong for quite a while due to ongoing housing supply pressure around the nation.