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What does it cost to buy an investment property?
Here's how you can buy a $450,000 investment property for $54 per week!
Sample Cash Flow – For Local Australian Investor
Purchasing a typical 1 bedroom plus study apartment in our recent North Melbourne project $450,000 (sold in late 2009)
Assumptions:
Local Investor, currently earning an income of $95,000 with no other tax deductions.
Investor has existing equity in another property, so will borrow all required funds for this purchase.
Capital growth 6%pa, Inflation 4%pa, mortgage interest 6.25%pa Interest Only Loan.
Loan required, including all costs $455,070.
Projected cash flow in Year 1
Cash In:
Gross Rent $22,932
Cash Deductions:
Interest $28,442
Property expenses $6,070
Pre Tax Cash Flow: -$11,580
Non Cash Deductions:
Depreciation $11,908
Loan Costs $554
Total Deductions: $46,974
Income tax Credits: $8,773
After Tax cash Flow -$2,807
Ie your net cost in year one after you receive rent, pay all the property costs and receive your tax deduction (which can be received throughout the year) your total cash cost in year one is $2,807, or $54 per week
Who pays for your property in year one:
Your tenant has contributed 66% of the holding cost of Your Property
The Australian Tax Offfice has contributed 25% of the holding cost of Your Property
You have contributed 8% of the holding cost of Your Property
If Sold after 5 Years:
Total Cash Invested: $14,352
Total Income tax refunded $36,546
Property Value: $602,202
Selling costs & Capital Gains Tax $53,838
Your equity once sold and loan repaid $93,294 (ie your cash in hand after tax)
If Sold after 10 Years:
Total Cash Invested: $23,064
Total Income tax refunded $22,362
Property Value: $805,881
Selling costs & Capital Gains Tax $114,357
Your equity once sold and loan repaid $236,454 (ie your cash in hand after tax)
Your total cash investment of $23,064 over the 10 years has grown to
$236,454, so a return of $213,390. Not a bad return given the security
that property investment traditionally offers over other forms of investment.
If you would like a copy of the full projections and assumptions for the above cash flow model please send us an enquiry , with your request and we will forward a pdf file with a comprehensive report illustrating the above projections.
Disclaimer: Please note that the projections listed above simply illustrate the outcome calculated from the input values and the assumptions contained in the model. Hence the figures can be varied as required and are in no way intended to be a guarantee of future performance.
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