How much does it cost to hold a $300k property

[BenG]

Hi forumites,

I have been working out how much it will cost me and my partner a year to hold an apartment worth 300k as an investment and was after some feedback. Lets say we borrrow the full amount, my calcualtions are:

Costs
Interest $27,000 a year (based on 9% interest)
Strata $2000 a year
Agency fees $1000 a year

Money in
rent (based on 5% yield) $15600

Overall it costs $14400 a year before an tax benefits.

This is obvioulsy a very simple calculation but I'm just trying to do some quick sums to see what we would be comfortable paying each month.

Any thought would be great

Thanks

 

[PrimeCommercial]

Landlord Insurance
Maintainance & repairs
A tad extra on your accountants fees at the end of financial year

 

[alexlee]

Tax is a big component here.

Add in council rates of maybe another 1,500 a year? So your net tax loss excluding depreciation is 16,000.

Assuming 30% tax rate and 6k depreciation

(-16,000 x 0.7) + (6,000 x 0.3) = -9,400 or 180 per week.

BTW, you have to put in 15,000 yourself for stamp duty etc at the start. Your agents fees are a bit low bit we're talking +/- 1000.
Alex

 

[WBG Redcliffe]

you need to invest some $ and buy PIA personal. Its an excellent investment and will tell you to the dollar how much an IP will cost you.

 

[BenG]

Thanks for the info guys. Both of these responses are useful.

Cheers

 

[Lukey13]

you need to invest some $ and buy PIA personal. Its an excellent investment and will tell you to the dollar how much an IP will cost you.

That sounds like a good idea which I should probably take up myself.

I'm assuming you could claim this outright as a tax deduction against your IPs?? Anyone?

 

[dajackal]

Tax is a big component here.

Add in council rates of maybe another 1,500 a year? So your net tax loss excluding depreciation is 16,000.

Assuming 30% tax rate and 6k depreciation

(-16,000 x 0.7) + (6,000 x 0.3) = -9,400 or 180 per week.

BTW, you have to put in 15,000 yourself for stamp duty etc at the start. Your agents fees are a bit low bit we're talking +/- 1000.
Alex

alex...can you explain how you performed those calculations? confused why you are multiplying by 0.7 for net loss and 0.3 for depreciation.

 

[alexlee]

alex...can you explain how you performed those calculations? confused why you are multiplying by 0.7 for net loss and 0.3 for depreciation.

I'm assuming a tax rate of 30%. So if you pay interest of $100, that's a tax deductible cash expense so it really costs you $70 (or $100 x 0.7). You pay out $100 but 'save' $30 in tax payable on other income.

Depreciation, however, is deductible but NOT cash, so you don't outlay anything but get the tax benefit of 30%. So for every $100 depreciation, you don't pay anything out, but save $30 on tax on other income. So your after tax position is $100 x 30% = $30.

When calculating after tax cashflow, cash and non cash expenses have very different effects.
Alex

 

[ruroshin]

Also, if you're borrowing 100% it means you're paying LMI which is deductable over 5 years period.