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Investment Property Cash Flow

August 23, 2013 6:30 pm
posted by James Parnwell

investment property cash flowHave you worked out your investment property cash flow?

The first thing that people want to know is how much the investment property is going to cost and how much will it return.

That should be the last question you ask.

The first question you should ask is how much is this investment property cash flow going to be each week?

If you’re wise and you plan to hold the investment property for the long term it’s the cost per week that will have the most impact on your lifestyle for that time period.

Once you know how much the investment property cash flow is going to be, there are a number of different tax deductions and refunds that could leave you out of pocket as little as a couple of dollars each week!

Here’s a hypothetical but realistic example of  the investment property cash flow of a property costing $525, 000 leaving the owner just $3 out of pocket at the end of the week after taxes and rebates.

Note that a change in the deposit, as well as a different gross salary will equate to a significantly different investment property cash flow outcome. Contact us for an analysis of your own investment property cash flow!

investment property cash flow

Total Cost of investment property

In the Total Cost section, prices have been set as an assumption. Note the 40,000 deposit would change the outcome of the weekly cost significantly if you were to just contribute a deposit of say $15,000.

Also note the interest rate, set at 6% is significantly higher than the current interest rates. Great news for you!

Outgoings and Income

This is probably the most critical section to be aware of.

After calculating the annual interest ($29, 280) and adding rates, body corporate fees, property management and insurance, a property bought for $525,000 will cost around $664 dollars weekly.

Be aware that if you were to lose tenants for a period of time, you may be up for covering these costs.

As it is when investing in anything, it’s always wise to have enough savings to be able to cover these costs for a couple of months should something go wrong.

After including the income you will be making on your property (in this example we’ve set it at $500 rent weekly) you are left which a much nicer weekly cost of $164.

Allowable tax deductions

This is where it gets interesting.

There are a number of different tax rebates you can claim on an investment property including Building depreciation fixtures and fittings.

Building depreciation and fixtures and fittings tax deductions, in this example equate to $20,000, will lower the taxable income from $150, 000 to $129,000.

Tax refund calculations and summary of your investment property cash flow

After lowering the $46, 904 taxes to $38, 632 annually the individual will receive a tax rebate of $161.

On a $525, 000 property, costing $164 weekly to own ($664 weekly out goings plus $500 rent), a weekly tax rebate of $161 will leave the owner with a property costing them $3 each week.

This is a realistic example for many individuals who are fearful of taking the plunge into investing!

With a plan for your finances , investing in property may not be as scary, or expensive as you think!

Contact us for a realistic  plan for your investment property cash flow.

 

Written by James Parnwell and Jordan Cox

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