Is Negative Gearing Still a Good Strategy?

I had a coffee with new client  last week — let’s call him Dave.

Before we’d even finished the small talk, he slid a  folder across the coffee table.

Inside... three investment properties, two interest-only loans,
and a fancy spreadsheet.

“Negative gearing,” he said proudly, tapping the folder.
“I’m saving a fortune on tax.”

That was the moment I realised Dave hadn’t come to see me for advice.
He’d come for validation.

This was Dave's attitude ....

Cost-of-living pressure?

“Perfect time to buy another investment place.”

Interest rates rise?

“Even better for deductions.”

House prices soften?

“That’s when you load up.”

So I asked him..... “Do you actually make money on these properties?”

He stared at me blank.
And yep ...just as I thought .... crickets

Here’s the thing about negative gearing  that poeople  like Dave often misunderstand:

They think losing money is a strategy.

They’ll bleed thousands a year on interest, repairs, strata fees, insurance, property managers, and that mysterious plumbing bill that always arrives at the worst possible moment… all for the thrill of knocking a few bucks off their taxable income.

“You don’t save money by losing money,” I told him. 

But he shook his head.

“Everyone’s doing it.”

And he’s right — that’s the problem.

Negative gearing has become a national obsession. No politician dares touch it because voters cling to it like it’s their childhood teddy bear.

Meanwhile, high earners use it to trim their tax bill, first-home buyers get steamrolled, and investors convince themselves they’re financial masterminds because their accountant can spell ‘deduction’.

Here’s what negative gearing is terrible at:

Actually making you wealthy.

Property might. Smart buying might. Holding long-term might.

But purposely losing money to save tax?

You see, the numbers just don't stack . 

Unless of course, you understand how to make your property cash flow positive. That's where your properties put money in  your pocket. And that my friends is the holy grail!

But to lose money on a negatively geared property . That’s just a very expensive illusion  and plain dumb.

And the kicker? When rates climb, rents stall, or that tax refund doesn’t quite cover the black hole in the budget… the whole “I’m building wealth” narrative evaporates.

So I made Dave a bet.

“If you’re convinced negative gearing is your golden ticket, let’s put it to the test. Your negatively geared portfolio versus a simple portfolio of Australian index funds (with fully franked dividends) .  Ten years. Loser buys dinner"

I already know how this ends.

Not because I’m clever.
Because real wealth isn’t built by clever tricks.

It’s built by resisting the urge to be clever.

See you in 10 years, Dave.
I’ll take my steak medium rare.

P.S. If you'd like to review your investment strategy, please make an appointment for a complimentary consultation,