Neutral Gearing

What is neutral gearing?

Neutral gearing occurs when the income generated from an investment property matches the expenses associated with owning and maintaining that property. In this case, your taxable income would not be affected. 

How is neutral gearing different from positive/negative gearing? 

Neutral gearing, positive gearing, and negative gearing represent different financial scenarios for property investors. In neutral gearing, the rental income matches the expenses, resulting in neither profit nor loss. 

Positive gearing occurs when rental income exceeds expenses, generating positive cash flow, while negative gearing happens when rental income falls short of expenses. 

What is the advantage of neutral gearing? 

The primary benefit of neutral gearing is that it provides stability for the investor. Since the rental income covers all expenses, there is no need for the investor to inject additional funds to cover any shortfall (like in the case of negative gearing). 

With this said, neutral gearing is not easy to achieve intentionally as expenses related to investment properties can fluctuate over time.