Negative gearing will only work if your overall expenses exceed your rental income. From my experience you'd have to buy something really really cheap and have good rental returns to even hope of covering the mortgage payments. However, typically where houses are cheap it generally follows that the going rate for rent is cheap too, otherwise most renters would become home buyers themselves.
Nothing is really free, so a good return at tax time is usually because you've had to shell out for expenses during the year. You'll only get 'back' what you've spent.
Be prepared and have the capacity to pay for replacement of household items (with 5 minutes of notice from tenants) for things like hot water services, ovens, along with services from plumbers, electricians etc. Over the years we've had several situations where the tenants have stopped paying the rent for various excuses. Sometimes they tell you, some times they don't bother. Either way the bank won't care about issues you have with getting your rent but will still expect their mortgage payments from you on time. You need to consider if you could cover the mortgage for days, weeks, months whilst you chase the tenant for outstanding payments.
It's easy to think you can just kick someone out of your property if they don't pay the rent or aren't looking after the place as agreed. Unfortunately it's not as simple as that and you need to follow a process, which can be tedious, otherwise as ironic as it sounds you could find yourself in trouble with the law.
Decide whether you manage the place yourself, or get an agent to do it. We've had a terrible run with agents that have let tenants run riot, run the places down, not chased for rent etc, so for us they have been a waste of money. We now manage our investment properties ourselves. It's more work for us but at least we feel we are in control.
Be prepared for your rental to be damaged over time and don't expect people to live like you do. No point in having any emotional or sentimental attachment to any property you buy. People simply won't treat the place like it was their own and care factor (as a generalisation) is pretty low by tennats. Don't expect too much sympathy from the rental tribunal either if you ever have to go down that path, as they generally err on the side of the renter.
If you plan for a worst case scenario and end up with a decent tenant that looks after the place, is clean and pays the rent on time then it's not a bad experience. If you can reduce your taxable income along the way whilst getting some appreciation on the property then you're winning, but I'd suggest property investment is very much a long term investment for the best gains and benefits.
