Positive gearing is where the income generated from an investment property is more than expenses including the associated interest rate. A positively geared investment will provide the investor with returns that is either equal to or more than the funds invested.

In contrast to a negatively geared investment where you get major tax reliefs if you can withstand and ride the market downturns and hold out for a long term for selling at a profit, a positively geared investment is less risky and stable. Here there is no anxiety regarding the appreciation of your capital.
If the investment is in shares, the dividends can be used to pay accumulated interest. If there is a leftover amount, that can be used to reduce the amount borrowed. Positive gearing in property investments do not require subtraction of losses from sales amount as these investments are constantly generating profit throughout the life of the investment. Here the interest rate is managed effectively by investing more to begin with, which is essentially taken care of by the rental income. This is in contrast to negative gearing where initial investment is low, borrowing is high and therefore the huge interest rate is difficult to be covered by the rental income.

In the property investment market, positive gearing is the best option as it allows you to earn definite returns from your investment without depending entirely on capital gains. One of the disadvantages with positive gearing is the amount of tax you have to pay. There are no tax exemptions here but it is worth it if the property generates more profit than the tax you shell out each year.

Positive gearing can be tricky if not properly understood. It relies on the concept that the price of the property is cheap and rental income is more. Finding a property like this could be a tough task and not everyone has the upfront funds to invest in order to reduce on the amount of borrowed money. It is essential to strike a balance between the probable returns on the property you are purchasing and the amount of interest you commit to.

An expert financial and property consultant will be able to guide you in the right direction. They will be able to explain to you in detail about the pros and cons involved in both positive and negative gearing. This way, it is possible for you to make an informed decision.