Before using negative gearing in property investing, it is important to consider a few important factors. There are many reasons why property investors go for negative gearing. One of the most common reasons is capital growth or equity; this means that property investors are eager to put up with the additional monthly expenditures provided that they are able to sell the property in the future at a much higher rate, and therefore gain from substantial profit. In such cases, negative gearing can be quite profitable. This kind of option is mostly profitable in upscale locations where property prices are high or have the potential to go higher.

Another reason why investors opt for negative gearing is when they have an impressive portfolio of properties that fetches them a profitable monthly income. Such investors need to pay tax on the income generated through their properties by the end of the year. Investors who purchase negatively geared property gain from the benefit of paying less tax as their monthly income rate gets reduced.