Simple hacks to make investment property cash positive

What Does Positive Gearing Actually Mean?

Positive gearing means the rental income from your investment property covers all your property expenses and loan repayments, with money left over. You're earning more each week than you're spending, which makes the property cash positive from day one.

Consider a property in Mandurah where the weekly rent is $520. Your loan repayments might be $440 per week, rates and insurance cost $70 per week, and after accounting for a realistic vacancy buffer, you're still $10 ahead each week. That's positive gearing.

The difference between this and negative gearing is not just about tax. Negative gearing assumes you'll claim a loss against your other income to reduce tax. Positive gearing removes the need to subsidise the property from your wage. For buyers in Western Australia who want to expand their portfolio without stretching their household budget, positive gearing creates capacity to borrow again sooner.

Why Positive Gearing Matters More Now

From 1 July 2027, the way losses on established residential investment properties are treated will change. If you buy an established property after 12 May 2026, you won't be able to claim rental losses against your wage or salary. Those losses can only offset rental income or capital gains from other residential properties.

Positive gearing sidesteps this issue entirely. If your property earns more than it costs, there's no loss to carry forward or claim. Your cash flow is neutral or better, and you're not relying on wage income to cover shortfalls each month.

This shift makes positive gearing more attractive for buyers planning to build a portfolio, particularly if you're purchasing established homes in suburbs where rent covers repayments. For properties purchased before Budget night, the existing negative gearing rules still apply, but forward planning now matters more than it did six months ago.

How Loan Structure Affects Whether a Property Is Positive

The way your investment loan is structured determines whether your property is cash positive. Using interest-only repayments instead of principal and interest reduces your weekly repayment, which can turn a borderline property into a positively geared one.

As an example, a $450,000 loan at current variable rates on principal and interest might cost $670 per week. Switch that same loan to interest-only and the repayment drops to around $490 per week. If your rental income is $550 per week, the difference between breaking even and being $60 ahead comes down to that loan structure decision.

Interest-only terms typically run for one to five years, after which the loan reverts to principal and interest unless you request an extension. Lenders assess whether the property can service the higher repayment when the interest-only period ends, so borrowing capacity still matters. But for investors prioritising cash flow in the short term, interest-only repayments are one of the clearest levers you can pull.

Loan to Value Ratio and Borrowing Costs

Your deposit size affects your interest rate and whether you'll pay Lenders Mortgage Insurance. A larger deposit reduces your loan to value ratio, which often unlocks better rates and avoids LMI, leaving more rental income in your pocket after each repayment.

If you borrow 90% of a property's value, you'll pay LMI and typically receive a higher interest rate than someone borrowing 80%. That difference might only be 0.20% to 0.30%, but on a $400,000 loan it adds $15 to $25 per week to your repayment. Combined with a one-off LMI premium of $10,000 to $15,000, a smaller deposit can shift a property from slightly positive to slightly negative.

For investors using equity from an existing property to fund the deposit, structuring that equity release carefully matters. Borrowing against your home to fund a 20% deposit on an investment property avoids LMI on the investment loan and keeps your borrowing costs lower. If you're refinancing to access that equity, pairing it with investment loan refinancing can sometimes improve rates on both loans at once.

Suburbs in WA Where Positive Gearing Is More Common

Certain suburbs in Western Australia deliver stronger rental yields relative to purchase price, which makes positive gearing more achievable. Regional centres and outer metropolitan areas with high rental demand and lower entry prices often fit this profile.

In Mandurah, for instance, rental yields sit around 5% to 6% depending on property type. A unit priced around $350,000 might rent for $400 per week, and with a 20% deposit, your repayments and holding costs can sit below that figure. Kwinana, Rockingham, and parts of Bunbury also show similar rental dynamics, particularly for properties near employment hubs or transport links.

Perth's inner suburbs rarely deliver positive gearing unless you're buying a higher-density property with very low body corporate fees. The focus in those areas is usually on capital growth rather than immediate cash flow. If your goal is to build a portfolio quickly and you need each property to pay for itself, looking beyond the inner metro area opens more options.

What Lenders Look at When You Apply for an Investment Loan

Lenders assess investment loan applications differently to owner-occupied loans. They'll factor in rental income, but only a portion of it, usually 80%, to account for vacancy periods and maintenance costs. Your existing debts, living expenses, and other loan commitments all reduce how much you can borrow.

If you're applying for a positively geared property, the rental income helps your borrowing capacity because it offsets the new loan repayment. But lenders still assess the loan at a higher interest rate than you'll actually pay, often 3% above the current rate, to ensure you can afford repayments if rates rise. That buffer can reduce how much you're approved for, even if the property is cash positive at today's rates.

Some lenders are more flexible with how they assess rental income or investment loan serviceability, particularly if you already own property or work in a high-income profession. Comparing investment loan options across multiple lenders before applying gives you a clearer picture of where your borrowing capacity sits and which loan products suit your portfolio strategy.

Fixed Rate or Variable Rate for Positive Gearing

Choosing between a fixed rate and a variable rate affects your repayment stability and your ability to make extra repayments or access offset accounts. Fixed rates lock in your repayment amount, which makes budgeting simpler, but they usually come with restrictions on additional repayments and no offset facility.

Variable rates move with the market, so your repayments can increase or decrease depending on rate changes. But variable loans typically allow unlimited extra repayments and come with offset accounts, which reduce the interest you're charged if you park surplus cash there. For positively geared properties where you're building surplus income, an offset account lets that cash work harder without locking it away.

Some investors use a split structure, fixing part of the loan for repayment certainty and keeping the rest variable for flexibility. If rates drop, the variable portion benefits. If rates rise, the fixed portion protects part of your repayment. There's no universal answer, but understanding how each rate type interacts with your cash flow and tax position helps you structure the loan to suit your circumstances.

Tax Treatment of Positive Gearing

When your property earns more than it costs, you'll pay tax on that profit. The surplus counts as assessable income in your tax return, which means it's added to your other income and taxed at your marginal rate. This is the opposite of negative gearing, where a loss reduces your taxable income.

For a property that's $50 per week cash positive, that's an extra $2,600 per year in taxable income. If your marginal tax rate is 32.5%, you'll pay around $845 in tax on that profit, leaving you with $1,755 after tax. The property is still contributing positively to your cash flow, but not by the full $2,600.

You can still claim all the usual deductions, such as loan interest, property management fees, insurance, council rates, and depreciation. These deductions reduce your taxable rental income, so keeping detailed records matters. If your deductions are high enough, they can turn a positively geared property into a neutral one for tax purposes, even though your actual cash flow remains positive. Speaking to an accountant before structuring your loan ensures you're making decisions that align with both your cash flow and tax outcome.

Building a Portfolio Without Wage Subsidy

Positive gearing allows you to buy additional investment properties without needing to fund shortfalls from your salary. Each property that pays for itself preserves your borrowing capacity because lenders see rental income covering expenses rather than you carrying ongoing losses.

If you own three negatively geared properties, each costing you $100 per week after rent, that's $300 per week leaving your household budget. Lenders factor that into your living expenses when assessing your next application, which reduces how much you can borrow. Three positively geared properties that each contribute $20 per week do the opposite, they improve your serviceability position and make it simpler to secure loan approval for property four.

This approach suits buyers who want to build wealth through property but don't have a high salary to absorb ongoing losses. It also suits buyers who want to maintain lifestyle flexibility or who work in industries where income fluctuates. Positive gearing doesn't rely on future capital growth to make the numbers work. The property pays for itself now, and any capital growth is a bonus rather than the primary return.

Call one of our team or book an appointment at a time that works for you. We can walk through your portfolio goals, review properties you're considering, and structure your investment loan to match your cash flow and borrowing capacity.

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