28. Know when to chase positively geared properties
As a rule, you’re looking for the best return on investment (ROI) for the least risk with each
investment. You need to consider capital growth as well as income and tax, too. That may mean
buying a negatively-geared property.
If it is the best ROI with the lowest risk, then it is not stupid to buy negatively-geared property. What is stupid is choosing an investment with either a poorer ROI or higher risk profile simply because it is cash-flow positive.
But there may come a time when you’re unable to service more debt because your cash flow is too low. You need to know in advance how lenders will view your position after you’ve bought the next property. You don’t want to be stuck after you’ve purchased.
If your cash flow is looking a bit tight, aim for positively geared property. Not properties that are cash-flow positive after tax, but properties that have you paying more tax. That is, the income exceeds all expenses related to that property before tax is even considered.