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Property investment has been a fantastic tool that many of my clients have used to build their wealth where the actual cost of owning a rental property – particularly with low interest rates available – is very affordable, yet the question of if it’s affordable for ‘me’ is one of the most frequently asked questions I hear. So are the late night adds claiming “… own a rental property for less than $100 per week …” for real?


The financial and tax advantages of owning a rental property are very real, so to help you see if it’s achievable for you personally, I’ve added an ‘investment property calculator’ to my website. To use the calculator click here

Here’s the information you’ll need to complete the calculation (I’ve also included an example):

  • Property value, stamp duty and other fees – this is a guide for how much the property will cost to buy plus any fees.  Note that this isn’t important for the calculations but is important for your budgeting to make sure it fits within your affordability and borrowing capacity.
  • Loan amount and interest rate – enter the amount you will need to borrow to finance the property. If you are using another property as security (i.e. to raise a deposit) for the investment property loan, these borrowings may be deductible and should be included in the calculations.
  • Rental per week – the expected weekly rental you will receive.
  • Property Agent Fees – if your property is going to be managed by an agent, this will be the amount they will charge you as a percentage of the rent. On average this equates to 9% and includes their fees (i.e. leasing and management).
  • Property costs – including all annual costs like Council Rates, Strata Fees (if any) and Water rates. These are normally detailed on the sales documents however you will need to estimate repairs and insurance.
  • Property Deprecation – when you purchase a rental property, you are generally treated for tax purposes as having bought a building, plus various separate items of ‘plant’. Items of plant are depreciating assets, such as air conditioners, stoves and other items. You can deduct an amount equal to the decline in value for an income year of a depreciating asset that you held for any time during the year.
  • To assist you in determine some estimates visit https://www.bmtqs.com.au/tax-depreciation-schedule.  For example a $400,000 townhouse would have a depreciation deduction of $7,500 per annum on average for the first 5 years.
  • To calculate this accurately a Quantity Surveyor will be required to inspect the property and prepare a report. For more information see https://www.bmtqs.com.au/tax-depreciation-overview
  • Taxation Rate – to determine your current rate of tax, work out your annual taxable income, (is often on payslips, letters of employment or your last tax return) then compare your income to the following table (2018-19 taxation rates) to determine your taxation rate, the table also includes the 2% Medicare levy:

 

 

Income Range

Taxation Rate

$0 - $18,200

0%

$18,201 - $37,000

21%

$37,001 - $ 90,000

34.5%

$90,001 - $180,000

39%

$180,001 and higher

47%

 

 

For more information on what is allowed as a tax deduction, the ATO has an excellent rental property guide that you can download and read. This 2018 guide can be found at https://www.ato.gov.au/uploadedFiles/Content/IND/downloads/Rental-properties-2018.pdf

Actual Example

The following is a calculation for a property worth $400,000 that a client was looking to purchase. The calculations show that this would only cost them $50.54 as week on an interest only loan or $187.26 per week on a 30 year principal and interest loan.

If you have any questions about the calculator please contact me and I can guide you through the calculations. I can also put in you contact with people to assist you in selecting an appropriate property and determining your borrowing capacity.

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Rental Property Calculator

At the end of the financial year it can be a daunting tasks preparing your Individual Tax Return for lodgement. Use this calculator to assist with collecting all the information you'll need.

VIEW CALCULATOR