Investing

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Can I negatively gear commercial property?

Negative gearing occurs when an investor borrows money and buys commercial property, but the rental income from the property does not cover the interest charged on the loan. Whilst this sounds a little crazy at first, there can be some positive tax benefits for the buyer due to the ability to claim losses against taxed income.

As the property is owned, it can benefit from the passive rental income generated, and any capital gains the property may make during the period of ownership.

Negative gearing is a risky investment strategy, because commercial property values are not guaranteed to increase. Unexpected interruptions in the flow of rental income, or interest rate increases, can put negatively geared investors under extreme financial pressure. For these reasons, negative gearing should only be undertaken by buyers who have the ability to absorb losses in the event of adverse financial conditions.

Consult your Accountant or financial advisor for more advice on whether negative gearing is a suitable investment strategy for you.
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