As you can see, the return you receive can be significantly affected by taxes and cash flow losses.
However, without borrowing in the first place, the $395,000 before tax gain may not have been achieved.
There are many ways to manage taxes, and negative gearing is one.
In the previous example, you could also possibly defer the sale of the investment property to a year when your income may be lower, for example, your first year of retirement. Your marginal tax rate may be lower, resulting in lower tax on the capital gain.
This could have a dramatic effect on the after tax gains from this type of strategy. Due to the potential complications around gearing, talking to a qualified and experienced adviser may be of great value.