#108 - Stop Buying Properties To Lose Money

*Please note, this episode was recorded before the 2026 Federal Budget.

Negative gearing gets sold as a cheat code, but what if it’s just a fancy way to normalise losing money? Zeke and Oscar get real about the negative gearing vs positive gearing debate and why most people arguing online don’t understand what they’re actually signing up for. We talk cash flow, tax deductions, and the difference between a strategy that looks good “on paper” and a deal that feels good every week. 

We break down the basics in plain English: negative gearing means your rent is lower than your expenses, so you run at a loss that can reduce your taxable income. Positive gearing means your rent covers the costs and you keep profit, which can increase your taxable income. Then we dig into the nuance most investors miss, like how depreciation and other costs can still create tax advantages even when the property is neutral or cash flow positive. The goal isn’t to worship one label, it’s to buy a property that makes sense before tax and doesn’t wreck your budget. 

From there, we go deeper into real-world property investing strategy: serviceability, borrowing power, and why cash flow can help you scale from one investment property to the next faster. We also challenge the myth that high rental yield means you must give up capital growth, and we walk through the long-term view where retirement income from rent can matter just as much as the final sale price. We wrap with a reminder that location selection is everything, and that future policy changes could make “tax-first” plans riskier than people think. 

If you want a clear, practical take on building wealth through real estate investing without getting trapped by bad math, hit play. Subscribe to the Finance Bible Podcast, share this with someone debating gearing, and leave a review with your take: are you team cash flow, team growth, or both?

Transcript

Negative Vs Positive Gearing Teaser

Oscar Don 0:00

Negative gearing, positive gearing. Everyone has an opinion. Some say negative gearing is the only way to build wealth. Others say positive cash flow is the smarter play. But here's the reality.

Show Intro And Financial Disclaimer

SPEAKER_01 0:10

Most people arguing about negative and positive gearing actually don't understand it. In this episode, we're gonna break down exactly what each strategy does, who they're for, who they're not for, and how smart investors actually use both to build serious portfolios. Welcome back to another episode of the Finance Bible Podcast.

Oscar Don 0:34

Zeke here and your co-host Oscar. But before we get into it, please note that nothing in this podcast should ever be considered as personal financial advice.

SPEAKER_01 0:42

Although, if financial advice is what you are speaking, let us know we can get you in touch with the correct team. But for now, sit back, relax, and enjoy the show. Let's get into it. Welcome back. Here we are. We're here again. You will have heard our beautiful voices last week and you're about to hear them again right now. Or you are currently hearing them. Hello.

Why People Misuse Negative Gearing

Oscar Don 1:03

Lucky, lucky listeners.

SPEAKER_01 1:04

Yeah, well, as you heard in the trailer, we're going to be talking about positive and negative gearing. Now, first of all, I just want to come out and say something outrageous. Negative gearing, not a fan. Neither am I. And when I say not a fan of negative gearing, I don't mean I'm not a fan of negative gearing. I mean I'm not a fan of how people do negative gearing. So what I mean by properties and how they buy properties for negative gearing. Yes. And what I mean by that is people will look at properties and go, okay, it costs me$1.5 million, it rents for$600 a week. Yes, I'm going to be negative. That is a terrible terrible strategy. They're like, yeah, so many tax benefits. It's actually possible to buy a property with positive income, good yield, you know,$800k property, renting$900 per week, and still get negative gearing on paper because you've got things like depreciation and loan costs and so on and so on, but week by week you're not feeling that crunch of having the negative gear. And I just think that, personal opinion, if you're buying property or doing something purposefully to make less money, you're a goofball.

Oscar Don 2:13

Yeah, like why wouldn't you buy a property where it almost pays for itself? Well, let's just say it's neutrally geared and you're not feeling the pinch for it out of your own pocket and you're still making money with capital growth. And then come tax time, like Zeke said, on paper, you still technically had a loss, so you still help yourself. So I would much prefer that than paying$200 or$300 per week out of my own pocket just for a little tax refund at the end of the year.

SPEAKER_01 2:36

It's like when people are going ahead and they're like, oh, I'm not going to do overtime this week because I have to pay an additional like, you know, 10 cents in tax per dollar. It's like, but you're still making that extra. I'd rather make 40 cents.

Oscar Don 2:50

Yeah.

SPEAKER_01 2:51

50 cents, 60 cents, maybe 400 bucks and nothing. Yeah, I'd exactly. Why would you not want to make more money to pay less tax?

Oscar Don 2:59

Yeah. And the the funny thing is, I think, especially in Australia, a lot of people think negative gearing is the only way in buying investment properties. Reason being, there's so many companies out there who kind of struggle to find good properties which rent well and are close to neutrally positive. Like we've spoken to many different teams we work with, and the common thing they always tell us is we're one of the only companies they've spoken to and worked with who actually find good properties which can help be neutrally deposited cash flow, which is so rare, what it like as it seems like in this country, which is bizarre.

SPEAKER_01 3:36

I would not have thought that.

Make Cash Flow And Claim Deductions

Oscar Don 3:37

No, I think it's well, firstly, I I would think it's common sense to want a property that pays for itself or close to. But negative gearing, what it basically means is your rent is less than your expenses. So you run at a loss, and the loss reduces your taxable income, which is why people think it's a really good idea. So difference with positive gearing, opposite, your your rent covers your expenses and you run at a profit. So in terms of that, your gain increase your taxable income at the end of the year.

SPEAKER_01 4:06

Yeah, realistically, negative gearing, you're betting on having capital growth and you know getting a little tax deduction. Positive gearing, you can still get capital growth, but you're hoping for a positive cash flow where you're not going to be expending all of your money each week towards paying the property.

Oscar Don 4:23

Yeah, I think the issue is a lot of people think that to have a cash flow property is basically means you're forfeiting the capital growth potential. Yes, which is completely bogus. Yeah, it's it's just not true at all. Like we've we've got like the properties we're doing on the on the West Coast a few years ago, you know, six, seven hundred K renting for$900 a week. Ridiculous.

SPEAKER_01 4:44

Yeah, absolute freak show.

Oscar Don 4:46

And now you look at those property prices, we're talking nearly nearly a mil or more, some of them. So it just shows you that you can still make good money with an investment property and not feel the sting in your own pocket.

Positive Cash Flow Improves Serviceability

SPEAKER_01 5:00

Yeah, so a lot of people will go out and you know, if we're just gonna talk a little bit of numbers as an example, they'll buy, say, a million-dollar Sydney property or million-dollar Melbourne property that rents for$600 a week. We're talking like a one-bedroom unit in a decent location, and they'll be like, Yes, great, so happy. I've got a million-dollar property that's negative bulk cash per week. And obviously that's gonna be an older property if that's what it is, and it's renting for$600 per week, so they don't get much depreciation, they just get the loss on the interest versus the rent and the ongoing costs and everything, and they go, Cool, I'm offsetting my income, I'm reducing my taxable income. But the other way around is if you get something for$800k that can rent for$950 a week, then they look at it as oh no, I have to pay more tax because I'm making more money. But if you're doing that and there's something new, you get depreciation, it works out roughly the same anyway, but you don't have to expend all your money and you increase your serviceability because you're not losing money each week.

Oscar Don 5:58

We've spoken to clients in the past who always talk about how can we get to our next property in the next one to two, three years. We present them a property which is, you know, positively cash flow, and a common thing which they always say first before they go ahead with it is no, I want a negatively geared property to help with our tax. And it just blows your mind because if we can give you a property which is positive, also helps you with your tax, but doesn't affect your own pocket, why wouldn't you do that? And that just comes down as well to who, which which demographic does positive or negative gearing sue? So, generally speaking, if you're on a really, really high income, high income earners generally look at the negative gearing aspect for the tax reasons. But like I said, you can still get those benefits with a positively geared property. But if you're first time jumping into an investment property and you're wanting a negatively geared property, well, I hate to tell you, it's it's really not going to help you help you much in terms of until you get your tax refund. Because if you're like many Australians at the moment who are struggling to get into the property market and struggling to save up that deposit, I would hate to save my deposit for three years and then buy a property, and then all of a sudden I am paying 300 bucks a week plus my rent that that I'm you know, if I'm rent-based, I'm still gonna pay rent. 300 bucks plus you know 600 bucks where you're living, that's almost a grand a week.

SPEAKER_01 7:27

And then your sales ability is shot. You can't get another property for at least five years. You're relying on the capital growth to use the equity, but guess what?

Oscar Don 7:34

Your sales ability is yeah. And that's what I was gonna say before. With the guys who want to buy a property in one to two years, they don't understand that having a positively cash-flowed property will propel them to the next one, two, three, four properties.

SPEAKER_01 7:45

I'm gonna throw out a strange analogy here. And let me know if this actually makes sense or not, because I I actually don't know. I'm just rolling with it. Negative gearing to me is like eating a lettuce-only diet to lose weight. Yep, kind of positively geared property or good renting property with depreciation is like eating a good protein diet where you're still coming in getting getting some benefits and you're growing, you're doing things well. Whereas lettuce, you're just shooting yourself in the foot, you're you're destroying your body. It's not going to be good long term.

Oscar Don 8:19

Yeah. And then, yeah, that's a good point. And the funny thing is though, if you're all keen about negative begearing, what about if you've bought the property in the wrong wrong location? What if you're paying 300 bucks a week for this negative geared property, but it never goes up in value, or it's you know, 50 grand over seven years? Well, that is a trap a lot of people fall into as well. Because you want the growth, you want the income, you want the tax benefits, but the problem is don't buy blindly, like we said in last week's episode. You gotta make sure where you're where you're buying are areas that are going to move, otherwise it's literally pointless.

SPEAKER_01 8:56

I I just still can't get my head around the fact that you'd rather spend more money to lose more money to pay less tax when you can spend the same money or less, make more money, and dollar for dollar, sure you might pay more tax in the long run, but you make more anyway. So it completely baffles me. I I never understand it, never will, never have, and I could sit down and do so many logistical calculations to show the long-term impact of such. But we won't do that right now.

Retirement Math: Rent Can Matter More

Oscar Don 9:26

But in terms of positive gearing and like clients who it suits as well, you know, generally speaking, individuals individuals who want immediate income. So get a property, rent it out, you're making money. Also, as you mentioned before, it helps with the scaling strategy. So for ourselves and people who come to us and say we want to make, you know, well, we want to obtain two to three properties in the next two to three years. Well, here you go. Cash flow positive property in our eyes is the way to go to help you do servicing and increase your overall income.

SPEAKER_01 9:56

I also think, as well, if you're gonna sit down and you're gonna break down a long-term property strategy, like let's just say we're actually thinking about it long term. Okay.

Oscar Don 10:05

Let's think about long term.

SPEAKER_01 10:07

Capital growth. Let's say you get a unit in a capital city, yeah, and it grows from one million to two million in in ten years, which is pretty feasible. That's not in average. Yep. And it's renting for$600 per week at the start, and then call it one grand per week at the end. When you reach that point in 10 years' time, let's say you do$55 to$65, you want to hang up the boobs at$65, then at that point in time, cool, you've got a$2 million asset, it's paying you a grand a week. But if you go the other way around and you buy something for, let's just say, let's go the same value, keep it easy, one million, but it's renting for$1,300 a week, so it goes up to$2 million, and then it's renting for, let's say, two grand a week, then for the same amount of capital, you're getting double the rent. So when you hang up the boots at$65, you can get paid two grand a week to live in retirement, as opposed to the one grand a week. Which would you prefer? Like it's that simple. And guess what? If you get the capital gain strategy and the the negative gearing strategy, you can sell that and sure you've made a million dollars. But guess what? The other way you have as well, one of them's just paying you an extra grand per week in rent. So, yeah, baffle me some more.

Location Risk And Policy Uncertainty

Oscar Don 11:20

Do you want money in your pocket or not? That is the question. Yeah. And yeah, I don't think the media and the government helps with always talking about negative gearing and how good it is. I do feel like, as well, though, it's a bit of an old, an old play, like an old style of an old strategy I'm trying to get at. It's just Australians hate tax. Well, yeah, but I feel like it's the advisors and the property investment guys 20, 30 years ago who are all obsessed with negative gearing, like, let's get a negative geared property, this is going to be perfect for you. And I feel like it's slowly, you know, getting out of fashion, slowly, but it's still getting smashed.

SPEAKER_01 11:59

And if the government makes the changes they're looking at making, then negative gearing may be negatively impacted.

Oscar Don 12:04

Yeah, so if you yeah, jumped into that early, well, you might be in strife.

SPEAKER_01 12:08

Yeah, but we won't talk about them until they actually happen. We'll probably do an episode on that uh when the time comes. But that's really all I've got to say about negative gearing and positive gearing. I think common sense.

Oscar Don 12:18

Pretty obvious from the start of this episode, we've shown our true colours of which side of the uh the fence we sit on. And we will always sit on that side of the fence because it's achievable. And if you're like obviously Property Australia at as the at the moment, you've had WA, which has been really affordable and the rents are really high, now the price have caught up and the rents are you know not as positive as they were. Queensland is the same. So for ourselves, you've always got to pivot and look for the next location because there's always positively geared options out there. But if you're looking in the same location for 10 years, it's you're not gonna find it. So if people tell you out there, which I know people do, that they don't exist, well, they are lying because there's so many good opportunities out there where you can get the good cash flow and the growth. But yeah, I think that's everything we need to talk about.

SPEAKER_01 13:08

That's literally all I've got. We've done a bit of a rant. Now I'm just sitting here thinking how annoyed I get talkie about it.

Oscar Don 13:13

Yeah, I think we've we've hit an arrow on the head and we we love cash flow positive properties and we don't like negative gearing. So improve your serviceability, do yourself a favor, positive income, happy days, ciao. Yep, see you next time. Ciao.

SPEAKER_01 13:29

Well, that is the end of the episode. We hope you enjoyed it. And if you did, you know exactly what to do. Hit that follow button, like button, subscribe, share it to your friends, family, or even a co worker. If you're really feeling generous, you can send it off to an ex. Catch you next time. Hope you enjoyed it. Down like