How much price to pay to achieve neutral gearing

[andreww]

Hi, I am a newbie to the investment market and am looking for my first investment property.

I am trying to figure out how much price of house will give me neutral gearing. I can pay $200,000 as first payment; if the rent is $380 per week, home loan interest is 4.8%, to achieve neutral gearing, how much maximum of house price can I pay generally ? (need to consider other costs as well, the house is probably 30 years old). Pleae advise. Thanks.

 

[Scott No Mates]

A WFG allow 20% as your outgoings (rates, insurance, maintenance etc) then do your calculations from there.

 

[Terry_w]

Hi, I am a newbie to the investment market and am looking for my first investment property.

I am trying to figure out how much price of house will give me neutral gearing. I can pay $200,000 as first payment; if the rent is $380 per week, home loan interest is 4.8%, to achieve neutral gearing, how much maximum of house price can I pay generally ? (need to consider other costs as well, the house is probably 30 years old). Pleae advise. Thanks.

This would vary on property to property, just get a a spreadsheet going and factor in the tax position.

I hope you realise the effect tying up such a large amount of money will have on any future or current PPOR loan. Structure it differently and you can make it tax effective.

 

[andreww]

A WFG allow 20% as your outgoings (rates, insurance, maintenance etc) then do your calculations from there.

Thanks. Does itmeans that the total cost would be interest rate 4.8 % +2% (outgoing cost)=6.8%?

 

[Rolf Latham]

Know what your end game /goal is.

If you dont, work it out, and if you cant, thats ok,there is plenty of help available in the form of books, audio, seminars and people,

Working to structure around present circumstances often leads to regret.



ta
rolf

 

[Nattl3s]

Dont know how accurate it is but i crunch the numbers through an investment property cash flow calculator on smartline.com.au.
It works out stamp duty, gross and net yield, takes into account negative gearing according to your income and then tells you how much you contribute per week, or profit. It also works on ipad which is great. You need an idea about how much rates/ utilities/outgoings/management fees will be. Cheers, nat