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Home Calculators Can I afford an investment property Calculator
Can I Afford an Investment Property?
This calculator provides an estimate of how much an investment property will cost.
The calculator estimates the amount of cash you will require (or receive) on a monthly and annual basis to fund your investment property. It also gives an indication of the change in the amount of tax you will pay due to owning an investment property. These two measures are then combined to provide a measure of the after tax profit or loss associated with owning an investment property.
Loan details
Estimated results
Summary
- Annual repayments (Interest only) $0 / year
- Total property income $0 / year
- Other taxable income $0 / year
-
Annual rental income
- Year 1: $0
- Year 5: $0
- Year 10: $0
- Year 30: $0
-
Annual repayments
- Year 1: $0
- Year 5: $0
- Year 10: $0
- Year 30: $0
-
Annual cash expenses
- Year 1: $0
- Year 5: $0
- Year 10: $0
- Year 30: $0
-
Cash flow before tax
- Year 1: $0
- Year 5: $0
- Year 10: $0
- Year 30: $0
-
Tax benefit
- Year 1: $0
- Year 5: $0
- Year 10: $0
- Year 30: $0
-
Cash flow after tax
- Year 1: $0
- Year 5: $0
- Year 10: $0
- Year 30: $0
Can I Afford an Investment Property?
The figures provided should be used as an estimate only, and should not be relied on as an accurate indication of your future financial position in relation to an investment property. The figures are based upon the information you put into the calculator.
The calculation takes into account your calculated repayment amounts, in addition to the additional income from the property (the rental income entered by you) and property expenses (the expenses entered by you), and calculates your cash flow before and after tax, based on an estimate of any tax benefit applicable to you based on the taxable income entered by you, and the taxation information applicable to the current financial year.
We have made a number of assumptions when producing the calculations including:
Loan term and loan amount
- We assume the loan amount is what you enter into the calculator, and that the loan term is 30 years.
Interest rates
- We assume that the rate you enter is the rate that will apply to your loan for
the full loan term – even if you choose:
- a variable rate; or
- an interest only rate which, in practice, will only apply for a limited period after which a different rate will apply.
Interest and repayments
- The displayed annual repayments is based on the interest for the loan term, calculated on the entered interest rate. We make the following assumptions about repayments:
- Repayments are made monthly.
- Your annual interest charge is divided equally over 12 monthly payments (in practice, interest is calculated daily and charged monthly which can lead to your interest charge varying between months).
- Interest is charged to the loan account at the same frequency and on the same day as the repayments are made (this may not be the case in practice).
- Only your initial repayment amount is calculated. We assume that this repayment amount is payable for the loan term. In practice, repayment amounts can change for a variety of reasons.
- Weekly and fortnightly loan repayment amounts are assumed to be a quarter and a half of the monthly repayment amount respectively.
- When selecting interest-only (IO) repayments, it is assumed the IO repayments remain for the entire term of the loan.
Taxation information
- We base the taxation information on the current financial year.
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About the Investment Property Calculator
The investment property calculator provides an estimate of how much an investment property will cost.
It combines the cash operating revenue, rent, and the cash operating expenses, with the change in the amount of income tax paid to measure the net change in the investor's income due to owning the investment property.
It is important to recognise that the results are only rough estimates and should not be treated as financial advice. Before making any investment decisions you should consult your financial adviser.
Assumptions
- Cash operating expenses are assumed to be evenly spread throughout the year. This means that the cash operating expenses are the same for each month of year 1.
- It is assumed the investor has an interest only loan. This means that the loan repayments only consist of the interest for the period. It is assumed that they are deductible for tax purposes.
- When calculating the "Change in tax paid" only the marginal tax rates applicable to Australian residents are used. The calculator does incorporate the Medicare Levy of 1.5 percent but does not take any other factors which can influence the amount of tax paid, such as HECS contributions, any rebates, deductions, levies and surcharges into account.
- A building allowance is calculated for investment properties constructed after 18 July 1985. For buildings where construction began between 19/7/1985 and 15/9/1987, building allowance is 4 percent of the construction cost, for 25 years after construction. For investment properties where construction began after 15/9/1987 the building allowance is 2.5 percent of the construction cost, for 40 years after construction.
- The calculator does not consider the depreciation allowance, from the depreciable items contained in the investment property, which may accrue to the owner of an investment property.
Explanation of Terms
Monthly Rental Income:
Monthly Rental Income is the rental income you receive each month. It can be increased each year by inserting a growth rate in Potential Rental Growth per annum.
Monthly Loan Repayment:
Monthly Loan Repayment is the value of monthly loan repayments, assuming interest only payments.
Monthly Cash Operating Expenses:
Monthly Cash Operating Expenses is the total of the tax deductible expenses associated with maintaining the property for the month. It increases by the growth rate input in Annual Increase in Operating Expenses.
Cash Flow:
Cash Flow is the cash revenues less the cash expenses. That is Rental Income less the Loan Repayments and Cash Operating Expenses. This measures the amount of cash you will receive, if it is a positive number, or the amount you will have to pay, if it is a negative number.
Annual Building Allowance:
Annual Building Allowance is the tax deduction which can be made for this property. The rate at which building allowance can be claimed is determined by when the property was built.
Annual Tax Profit/Loss on Property:
Annual Tax Profit/Loss on Property combines the cash flow generated by the property with the tax deductions to determine the profit or loss for accounting purposes. Building allowance reduces taxable income, the profit or loss for accounting purposes will be lower than the cash flow generated.
Change in Tax Paid:
The Change in Tax Paid measures the change in the amount of income tax the investor pays due to owning the investment property, compared to if they did not own the property. This is calculated based on the annual taxable income from other sources entered by the user. If the Change in Tax Paid is negative it means the user pays less tax. If it is positive it means the user pays more tax, relative to if they had not owned the investment property.
After Tax Profit/Loss on Investment:
The After Tax Profit/Loss on Investment combines the cash flow associated with the investment property with the tax effect of owning the investment property to measure the net effect of the investment. A positive number indicates a profit, a negative amount indicates an after tax loss.
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