Investment lending: Why strategy matters
Good outcomes, happen by good planning and preparation, getting your finance structures correct before you invest is crucial to good outcomes
The right finance strategy can make the difference between success and failure when investing in property. One of the biggest mistakes we see investors make is diving in without a clear financial plan. Everyone would invest if it cost nothing or carried no risk—but that’s not reality.
A well-structured financial strategy is essential for achieving your investment goals. At Vanquish Finance Group, we take the time to:
- Assess your current financial position.
- Understand your goals and objectives.
- Determine what’s affordable and manageable.
- Outline a safe, tailored finance strategy so you know exactly what you’re committing to.
Negative gearing vs. positive gearing: What does it mean?
Negative gearing
Negative gearing occurs when the costs of holding an investment exceed the income it generates. Currently, the tax system allows you to offset these losses against your taxable income, reducing your overall tax liability.
Positive gearing
Positive gearing is the opposite—your investment earns more income than it costs to maintain. While this means profit, it also results in an income tax bill.
Typical costs of holding an investment property
- Council and water rates
- Agent fees and advertising costs
- Insurance (building and landlord protection)
- Owners’ corporation fees
- Interest payments
You can also claim depreciation on capital works and assets, which can further reduce taxable income.
Questions to ask and answer before you commit
Its better you consider the downside before you commit than after it’s too late
Q. What is the realistic growth potential of the investment?
Q. What will be the out-of-pocket cost after tax each year?
Q. How long until the investment becomes positively geared?
Q. Can you cope if interest rates rise by 7%?
Q. Does the potential net gain outweigh other options like super contributions or paying down your mortgage?
Q. Affordability, how much can you afford to contribute to any shortfall without putting yourself under financial stress?
Q. What is a comfortable amount of debt for you, there’s no point in borrowing so much that you can’t sleep at night?
Q. Are you appropriately insured for the extra debt and risk?
Q. Can you really afford to buy an investment property?
In our opinion it is better that you ask these questions before you buy and have work shopped appropriate solutions and strategies than when it’s too late.
Key takeaway
Most investments start negatively geared, but that should never be your main reason for investing. The goal is long-term capital growth and healthy profits—not just tax deductions. Always focus on the quality of the investment and ensure your finance structure supports your strategy.
