Negative Gearing Was Never the Strategy: Here's What Actually Builds Wealth

By Henry Single & Damian Healey, hosts of Pivot to Profit

The panic around negative gearing changes has one blind spot: for anyone actually building a serious property portfolio, negative gearing was never the strategy in the first place.

Negative gearing is not the way you make money. It’s a nice thing to have along the way, but it’s not the strategy.

Cash flow neutral to positive, always

The approach that actually compounds wealth is to chase cash-flow-neutral-to-positive properties in high-growth areas: assets that more or less wash their own face from early on, regardless of what tax concessions are or aren’t attached to them. That’s a deliberate choice, not an accident: it doesn’t matter how well a property performs on paper if you don’t have the ability to hold onto it through a rate cycle, a policy change, or a rough year.

Even in scenarios where an investor is pulling equity out of a property to fund the next purchase (maxed out, revalued every six months), the numbers still work over time. Rental growth outpaces the increase in interest repayments over a long enough horizon, typically within about ten years, if the property was bought in the right area to begin with. The negative gearing benefit was always a bonus sitting on top of that, not the reason the numbers worked.

Why this changes less than people think

That’s exactly why this round of tax changes hasn’t shifted the underlying strategy at all. If your properties were only ever “working” because of a negative gearing deduction, this budget is a genuine problem for your portfolio. If they were already washing their own face on a cash flow basis, the removal of a tax benefit is a mild inconvenience, not a portfolio-ending event.

If anything, the change has made good advice more valuable, not less. More people are realising that you can’t just pick a property at random, buy it in your personal name, and hope for the best. You need the right structure, the right entity, and the right property from day one. That’s not a new problem created by this budget. It has always been true. This budget just made it impossible to ignore.

For more on this philosophy, read our related piece, Pivot to Profit: What Buyers Agents Want You to Know Before You Invest.

This topic is unpacked in full, with the real numbers and the back-and-forth, on Episode 2 of Pivot to Profit. Give it a listen for the full conversation.