The Key to Building a Balanced Property Portfolio

In the world of Australian property investment, few concepts are as important—or as misunderstood—as gearing. Whether it’s positive or negative, gearing plays a critical role in shaping the financial performance and long-term success of your portfolio.

At Ramsey Property Wealth, we believe gearing is more than just a tax or cash flow decision—it’s a strategic tool that, when used correctly, helps investors balance income, growth, and risk at every stage of the journey.

What Is Gearing? A Quick Overview

Gearing refers to the practice of borrowing money to purchase an investment property. The way your rental income compares to your ongoing expenses determines whether your property is positively or negatively geared:

• Positive gearing: Your rental income exceeds all property-related expenses. The surplus is taxable income, but it boosts cash flow.
  
• Negative gearing: Your expenses (such as loan interest, maintenance, and management fees) exceed rental income. This results in a net loss, which may be used to reduce your taxable income.
  

The Role of Positive Gearing in a Balanced Portfolio

Positively geared properties can be incredibly useful for investors looking to:

• Improve short-term cash flow
  
• Increase borrowing capacity for future investments
  
• Reduce financial strain, particularly in uncertain economic conditions
  

However, these properties are often located in areas with slower capital growth, meaning they may not deliver the long-term value uplift investors are aiming for.

Why Negative Gearing Is Still Strategic

Contrary to popular belief, negatively geared properties are not inherently bad. In fact, they’re often found in high-demand suburbs with strong capital growth potential. This can mean:

• Larger long-term returns through property appreciation
  
• Tax deductions for high-income earners
  
• The chance to secure a high-quality asset that may outperform over time
  

The catch? They often require more upfront cash flow planning, and investors need the right financial buffer to manage the shortfall.

Smart Investors Use Both

The most successful property investors rarely stick to just one strategy. Instead, they build portfolios that:

• Use positively geared properties to stabilise cash flow
  
• Leverage negative gearing in high-growth areas for capital gains
  
• Adjust over time to reflect income, risk appetite, and financial goals
  

This balance helps reduce exposure to risk while ensuring the portfolio can still grow—and that's where a strategic plan becomes essential.

Why Gearing Needs Strategic Oversight

The right gearing mix is not something that happens by accident. Investors must consider:

• Personal tax position and income
  
• Holding costs vs rental yield
  
• Location growth potential
  
• Interest rate trends and loan structures
  
• Exit strategies and retirement planning
  

Even small mistakes—like misjudging cash flow or buying in the wrong market—can derail your progress for years. That’s why DIY investors often struggle to get gearing right.

How Ramsey Property Wealth Helps You Get the Balance Right

At Ramsey Property Wealth, we build customised investment strategies based on:

• Your income, risk profile and long-term goals
  
• Cash flow modelling and tax implications
• Portfolio reviews and growth forecasting
  
• Access to a team of property, mortgage and acquisition professionals
  

We guide clients through each property purchase with the broader portfolio and financial picture in mind.

Let’s Build Your Balanced Portfolio Together

Understanding gearing is one thing. Structuring your portfolio to grow and perform—in any market—is another.

If you are not already talking to our team, you can Book a free discovery session with Ramsey Property Wealth today and find out how the right gearing strategy can support your long-term wealth journey.

Ramsey Property Wealth Members can chat with our Client Concierge team directly via the Ramsey App.