Simple hacks to make your investment property pay you

A positively geared investment property generates more rental income than it costs to hold. The difference between rent collected and all expenses lands in your account as passive income, and it's assessable income you'll pay tax on each year.

Most officers looking at property investment assume they'll be negatively geared for years before the numbers turn around. That's often true in capital city markets, but positive gearing is achievable from day one if you target properties where rental yield outweighs borrowing costs and other expenses. The trade-off is usually location or capital growth potential, but for officers working long shifts who want rental income to supplement their take-home pay without chasing tenants for shortfalls, the strategy makes sense.

Why positive gearing suits shift workers in law enforcement

Positive cash flow means you're not funding a shortfall from your salary every month. If you're rostered on nights or managing overtime that fluctuates, knowing the property covers itself and adds to your income removes one more variable from your budget. You're building equity through loan repayments funded by someone else's rent, and you're keeping surplus income at the same time.

Officers with stable employment and overtime loading often qualify for investment loans for police officers at rates that make positive gearing possible when matched with the right property. Lenders assess your base salary and a portion of allowances, which improves serviceability and lets you borrow enough to target higher-yielding regional or suburban markets without stretching into negative territory.

Rental yield needs to exceed your total holding costs

Your total holding costs include loan interest, council rates, insurance, property management fees, body corporate fees if applicable, repairs, and an allowance for vacancy. If annual rent exceeds that total, the property is positively geared.

Consider an officer who purchases a three-bedroom house in a regional centre for $450,000 with a 20 per cent deposit. The loan amount is $360,000 at a variable rate. Annual rent is $28,000. Interest in the first year is roughly $21,600, council rates $2,200, landlord insurance $900, property management at 7 per cent of rent is $1,960, and a vacancy and maintenance allowance of $2,000 brings total holding costs to around $28,660. The property is slightly negatively geared in year one, but a small rate decrease or a rent increase of $15 per week turns it positive.

That example shows how tight the margins can be. Positive gearing relies on rental income staying strong and interest rates staying within a range that doesn't push costs above rent. Regional markets with consistent tenant demand and yields above 6 per cent give you more margin to absorb rate rises without slipping into negative territory.

Interest-only loans and principal-and-interest structures

An interest-only loan on an investment property keeps repayments lower during the interest-only period, which improves cash flow and makes positive gearing more achievable in the short term. You're not paying down the loan balance, so the full loan amount remains invested in the property and repayments are purely interest.

Most lenders offer interest-only periods of up to five years on investment loans. After that, the loan converts to principal and interest, and repayments increase. If you're using interest only loans for police officers to keep a property positively geared in the early years, you need a plan for what happens when the principal repayments start. Either rents rise enough to cover the higher repayment, or you accept the property may become negatively geared once the interest-only period ends, or you refinance to extend the interest-only term if your circumstances and the lender's policy allow.

Principal and interest from day one means higher repayments but faster equity build and lower interest paid over the life of the loan. It's harder to stay positively geared with principal and interest unless the yield is strong or your deposit is large enough to keep the loan amount and interest cost down.

Fixed or variable rates for predictable cash flow

A variable rate moves with market conditions, which means your interest cost and your cash flow can change each quarter. If rates drop, your holding costs fall and positive gearing improves. If rates rise, you may move from positive to neutral or negative gearing until rents catch up.

A fixed rate locks in your interest cost for a set term, usually one to five years. Your repayments stay the same regardless of market movements, which makes budgeting simpler and protects positive gearing if rates rise during the fixed term. The downside is you're locked in if rates fall, and breaking a fixed loan early can trigger significant costs.

Officers managing rosters and irregular income often prefer the certainty of fixed repayments for the first few years, then switch to variable once the property is established and rental income is proven. Split loans, where part of the loan is fixed and part is variable, give you some certainty and some flexibility, but they add complexity and may not suit every lender's product range.

Regional markets and higher rental yields

Positive gearing is more common in regional centres where property prices are lower and rental yields are higher. A property that costs $350,000 in a regional town might rent for $450 per week, delivering a gross yield above 6 per cent. The same $450 per week in a capital city suburb might only buy a property worth $600,000, where the yield drops below 4 per cent and positive gearing becomes difficult unless you have a large deposit.

Regional markets also tend to have lower capital growth over time compared to metro areas, so the strategy trades growth potential for immediate income. That trade-off suits officers who want cash flow now rather than waiting years for property values to rise. Vacancy rates, tenant demand, and local employment conditions matter more in regional areas, so you're relying on the town's economy staying stable.

Claimable expenses reduce your taxable rental income

All expenses related to earning rental income are deductible, including loan interest, property management, insurance, rates, repairs, and depreciation on the building and fixtures. Those deductions reduce your assessable rental income, but they don't change whether the property is positively geared in cash flow terms.

If a property generates $3,000 more rent than it costs to hold, you have $3,000 in surplus cash flow. That $3,000 is added to your assessable income, and you'll pay tax on it at your marginal rate. After tax, you keep the remainder. Officers on higher marginal rates keep less of the surplus, which is one reason positive gearing appeals more to those focused on cash flow rather than tax minimisation.

Depreciation on plant and equipment and capital works can create a situation where a property is positively geared in cash terms but shows a small tax loss on paper, giving you the surplus cash flow and a modest deduction against other income. That only works if your depreciation claims exceed the cash surplus, and it depends on the age and condition of the property.

How borrowing capacity and LMI affect the numbers

Your borrowing capacity determines how much you can borrow, and lenders assess investment loans using the rental income and your existing salary. Most lenders apply a rental income shading factor, typically 80 per cent, to account for vacancy and management costs. That shading reduces the rental income they'll count when calculating serviceability.

If you're borrowing above 80 per cent of the property value, you'll pay Lenders Mortgage Insurance. The LMI premium is typically capitalised into the loan, which increases your loan amount and your interest cost. A higher loan amount makes positive gearing harder to achieve because your interest cost rises. Some lenders offer LMI waivers for police officers up to 90 or even 95 per cent LVR, which can help you enter the market with a smaller deposit without the LMI cost weighing on your cash flow.

What happens when legislation changes in July 2027

From 1 July 2027, properties purchased after 12 May 2026 that are not eligible new builds will have rental losses quarantined. Those losses can't be offset against salary or other non-rental income. If you're targeting positive gearing, that legislative change doesn't affect you because you're not planning to claim a rental loss against other income. Your property generates surplus income, and you're taxed on that surplus.

If market conditions shift and the property moves from positive to negative gearing after July 2027, any rental loss from that point forward is quarantined and carried forward to offset future rental income or capital gains. Properties purchased before 12 May 2026 remain fully negatively geared under the old rules, and eligible new builds purchased after that date retain full negative gearing as well.

Call one of our team or book an appointment at a time that works for you. We'll run the numbers on rental yield, holding costs, and loan structures that suit your roster and your income, and we'll help you access investment loan options from banks and lenders across Australia who understand law enforcement employment.

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