Technically speaking, positive gearing is where the net income from the property is greater than the interest on the borrowed money. The result is a taxable gain.

 

Example:

 

In practice today, to ascertain whether a property is positively geared, we would include all costs on that property as well.

Considering today’s rates of interest, an investor would need to see a pure rental yield on a property of around 8% or more in order to sufficiently cover all interest and expenses and for it to be considered a positively geared property.