How does negative gearing really work?

Negative gearing is a form of financial leverage whereby an investor borrows money to acquire an income-producing investment property and expects the gross income generated by the investment, at least in the short term, to be less than the cost of owning and managing the investment, including depreciation and interest charged on the loan (but excluding capital repayments). Mr.Sri Sritharan, a chartered accountant, registered tax agent and director of Aranramsi Associates, explains more about this.