When to Choose a Positively Geared Investment Loan

Positive gearing means the rent covers your loan repayments and property costs, with cash left over each fortnight.

For plasterers with variable income or contract gaps, a positively geared investment property removes the risk of funding shortfalls when work slows down. You're not relying on wage income to cover loan repayments, and you're not waiting until tax time to claw back losses. The property pays for itself week to week, and the surplus goes into your offset account or towards the next deposit.

This approach has become more relevant since the negative gearing changes announced in May last year. From 1 July 2027, net rental losses on most residential properties purchased after 12 May last 2026 can only be offset against other residential rental income, not your plastering wages. If you're buying now, the tax benefit that made negatively geared properties attractive has been quarantined unless you're buying an eligible new build.

How Positive Gearing Works for Plasterers

A property is positively geared when rental income exceeds all holding costs, including loan repayments, rates, insurance, strata fees, repairs and property management.

Consider a plasterer who purchases a two-bedroom unit in a regional centre where yields are higher. Rent comes in at $480 per week. The loan repayment on a principal and interest loan is $420 per week, and other costs add another $35 per week. That leaves $25 per week surplus, or roughly $1,300 a year after accounting for occasional vacancy. The property is positively geared, and the surplus income is taxable at the plasterer's marginal rate. In our experience, that weekly buffer is worth more than a future tax deduction when you're managing uneven cash flow.

Investment Loan Features That Support Positive Gearing

Your loan structure directly affects whether a property stays cash flow positive.

Principal and interest repayments are higher than interest only, but they reduce your loan balance and increase equity each year. For a positively geared property, principal and interest loans work because the rental income already covers the repayment. You're building wealth through both cash flow and equity growth, and you're not left with a large loan balance to refinance when an interest only period ends. Most lenders offer investment loans for tradies on both repayment structures, but the choice depends on your cash flow tolerance and long-term strategy.

Variable rate loans give you access to offset accounts, which means surplus rent and your own savings sit in the offset and reduce interest daily. Fixed rate loans lock in your repayment amount, which can make budgeting simpler when you're quoting jobs months in advance. Some lenders allow a split, where part of the loan is fixed and part is variable with an offset.

When Positive Gearing Beats Negative Gearing

Positive gearing suits plasterers who want immediate cash flow, not a tax refund twelve months away.

If your income fluctuates due to contract timing, weather delays, or seasonal demand, a negatively geared property adds pressure during lean months. You're funding the shortfall out of your own pocket, and if work dries up for a few weeks, the gap becomes a problem. A positively geared property removes that pressure. Rent covers the loan, and you're not chasing tax deductions to offset losses.

The other factor is the new tax rules. Properties purchased after 12 May last year and settled after 1 July 2027 cannot offset rental losses against wage income unless the property is an eligible new build. If you're buying an established unit or townhouse, negative gearing as a strategy is no longer available. Positive gearing becomes the only way to make the investment self-funding.

Where to Find Positively Geared Properties

Regional centres and outer metro areas with strong rental demand and lower purchase prices are where positive gearing works.

You're looking for locations where gross rental yields sit above 5.5 per cent, and where demand from renters is stable due to local employment, education, or industry. Mining towns can deliver high yields, but vacancy risk is higher when the industry cycle turns. University towns and regional health hubs tend to hold tenants more reliably. Purchase price matters too. A unit in a capital city CBD might rent for $600 per week, but if the purchase price is $850,000, the yield is too low to cover repayments. A unit in a regional centre might rent for $400 per week on a $400,000 purchase price, delivering a yield above 5 per cent and leaving room for positive gearing once the loan is structured correctly.

If you're considering buying your first investment property, start by comparing rent to purchase price in the areas you're researching. Avoid assuming capital growth will make up for negative cash flow. It might, or it might not, and in the meantime you're funding the gap.

Structuring the Loan for Maximum Cash Flow

Your deposit size, loan amount, and whether you pay Lenders Mortgage Insurance all affect cash flow.

A 20 per cent deposit avoids LMI and reduces your loan amount, which lowers weekly repayments and makes positive gearing easier to achieve. If you're using equity from your home, the same principle applies. Borrow only what the rental income can service, not the maximum the lender will approve. Some plasterers access equity release loans to fund a deposit without selling another asset, but the equity loan also has a repayment, so the combined repayment across both loans needs to stay below rental income if the goal is positive gearing.

Loan to value ratio also affects your interest rate. Lenders offer discounts at lower LVRs, which directly improves cash flow. The difference between a rate at 85 per cent LVR and a rate at 70 per cent LVR can be 0.30 to 0.50 percentage points, which might be the difference between breaking even and running a weekly surplus.

Claimable Expenses and Tax Treatment

Rental income from a positively geared property is taxable, but you can still claim all the usual deductions.

Loan interest, property management fees, council and water rates, insurance, repairs, and depreciation on fixtures and fittings are all claimable. The difference is that your deductions don't create a loss that offsets your plastering income. Instead, they reduce the taxable rental profit. If your property generates $8,000 in rent and you have $5,000 in claimable expenses, you pay tax on $3,000 at your marginal rate. That's still a better outcome than funding a $5,000 loss out of your own cash and waiting for a $1,500 tax refund.

Depreciation schedules are worth getting even on positively geared properties. A quantity surveyor report costs around $600 and identifies deductions you wouldn't find yourself, particularly on plant and equipment in newer builds.

Refinancing to Improve Cash Flow

If your investment property is close to positive gearing but not quite there, refinancing can close the gap.

Lenders regularly offer lower rates to new customers than they give existing borrowers. If your current rate is 6.20 per cent and you can refinance to 5.80 per cent, the saving on a $400,000 loan is around $1,600 a year, or $30 per week. That might be enough to turn a marginal property into a positively geared one. Investment loan refinancing also lets you restructure from interest only to principal and interest, or vice versa, depending on what your cash flow needs are at the time.

Some lenders also offer offset accounts on refinance when your original loan didn't include one. If you've been running a positively geared property for two years and built up $15,000 in surplus rent, moving that into an offset on a refinanced loan reduces your interest and improves cash flow further.

Managing Vacancy and Holding Costs

Positive gearing assumes the property is tenanted, so vacancy periods need to be factored into your cash flow planning.

A property that generates $25 per week surplus when tenanted will cost you $455 per week if it sits empty for a month. Regional properties with strong employer demand tend to have lower vacancy rates than holiday towns or oversupplied new developments. Property managers report average vacancy rates by suburb, and anything consistently above 3 per cent should be a concern. If you're buying in an area with high vacancy risk, the yield needs to be high enough to absorb the occasional gap.

Body corporate fees in units and townhouses are another holding cost that doesn't change when the property is vacant. Factor those in before you commit. A unit with $1,800 annual body corporate fees costs you $35 per week whether it's tenanted or not.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers on your deposit, the rental yield, and the loan structure to make sure the property actually delivers positive cash flow, not just on paper but week to week.

Frequently Asked Questions