Hi guys, I'm new both here and in property investment in general but have done some basic research (including reading a lot of the comments and posts here) and thought of getting your opinion on it.
I wanted to share a scenario of buying an investment property and hopefully get your thoughts on whether it's a valid / realist scenario to work with as far as planning goes. I'm assuming a yearly view here but not sure whether I'm missing something. What I'm actually trying to gauge is whether the actual net cost to me after one year is a relatively good estimate:
-----
Assuming the below:
Purchase Price $: 340,000
Deposit Value $ @ 20% of value (80% LVR): 68,000
Est. transaction costs (including solicitor, fees, etc.) @ 5% of Purchase Price $: 17,000
Loan Amount $: 272,000
Yearly Interest Rate Repayments in $ @ 5.0% p.a.: 13,600
Yearly Income from Rent in $ (here I'm assuming renting it for 37 weeks in the year on a estimated weekly rent of $325 (calculated as 5% interest times the $ purchase price of 340K divided by 52 weeks). The other 15 weeks I do not include as am considering as costs such as vacancy and/or maintenance): 12,025
Est. capital gain @ 5% p.a.: 17,000
Est. depreciation in $: 5,000
Unrealised capital gain (or loss) in $ (calculated here as the sum of the depreciation value (est. $5,000) plus the difference between the interest paid ($13,600) and the yearly rent income ($12,025) which in this scenario is $1,575): 6,575
Negative gearing value in $(calculated here as an estimate using the top income bracket of 37% on the unrealised capital gain/loss of $6,575): 2,433
-----
After the above calculation, I would end up with an actual net position of -$858. Does it mean that if this scenario happened exactly as it is shown, I would pocket $858 after a year? Is it how I interpret that? Does this provide me with a fairly good framework to think about it?
Apologies for so many questions and for the time in reading this until here. It'd be great to get your views on this. Thank you!
I wanted to share a scenario of buying an investment property and hopefully get your thoughts on whether it's a valid / realist scenario to work with as far as planning goes. I'm assuming a yearly view here but not sure whether I'm missing something. What I'm actually trying to gauge is whether the actual net cost to me after one year is a relatively good estimate:
-----
Assuming the below:
Purchase Price $: 340,000
Deposit Value $ @ 20% of value (80% LVR): 68,000
Est. transaction costs (including solicitor, fees, etc.) @ 5% of Purchase Price $: 17,000
Loan Amount $: 272,000
Yearly Interest Rate Repayments in $ @ 5.0% p.a.: 13,600
Yearly Income from Rent in $ (here I'm assuming renting it for 37 weeks in the year on a estimated weekly rent of $325 (calculated as 5% interest times the $ purchase price of 340K divided by 52 weeks). The other 15 weeks I do not include as am considering as costs such as vacancy and/or maintenance): 12,025
Est. capital gain @ 5% p.a.: 17,000
Est. depreciation in $: 5,000
Unrealised capital gain (or loss) in $ (calculated here as the sum of the depreciation value (est. $5,000) plus the difference between the interest paid ($13,600) and the yearly rent income ($12,025) which in this scenario is $1,575): 6,575
Negative gearing value in $(calculated here as an estimate using the top income bracket of 37% on the unrealised capital gain/loss of $6,575): 2,433
-----
After the above calculation, I would end up with an actual net position of -$858. Does it mean that if this scenario happened exactly as it is shown, I would pocket $858 after a year? Is it how I interpret that? Does this provide me with a fairly good framework to think about it?
Apologies for so many questions and for the time in reading this until here. It'd be great to get your views on this. Thank you!