IP calculator - how to understand this

[penti99]

hi guys

I found this IP calculator on the net and seems to be pretty useful to get an idea of ur costs...

looks like I am not able to use it properly to make sense ...


need some help from guru's here to explain with an example

lets say the purchase price of property is 175k

with 5 % deposit

95% borrowed

so there would be LMI

we need to use lmi rates table -- am i right ????

the net rental yeild shows -ve

deductions shows in -ve as well



does it mean it has a negitive cash flow

its very important for me to get it right - i will be able to decide whether to go for it or not ....

i can only come with 5% deposit ... if it eats up into my disposable income and cannot be claimed ...

I will put off the idea for some time .. but again property prices keep -- how to beat this

its confusing ...

here is the link to download

http://www.investmentpropertycalculator.com.au/free-investment-property-calculator.html

waiting for your reply guys

thanks
sri

 

[penti99]

any one on this

guys any one on this ....

or what calculators does every one use


thanks

sri

 

[long88]

if small rate increase will make you unable to pay, then you better not get into the game and save some more, or get a better pay job ? you also need to have funds to cover unexpected, repairs, etc.

 

[travelbug]

Hi,
Put in the price of the property + solicitors costs + stamp duty + LMI, searches, reports etc.

So you have a total cost - what you have to put in = the amount you need to borrow.

Multiply this by the interest rate. This is your yearly cost.

Take this amount and add ongoing costs eg rates, insurance, strata, property management fees etc

This is the amount your property will cost you each year. Take away the rent which will give you the final cost.

You may also be able to deduct depreciation which is a tax break that doesn't involve you spending anything.

Hope that makes sense. So in effect you work out all the outgoings and deduct it from the ingoings (rent). If it's negative you get tax deductions.
This of course does not include things breaking etc.
If money is tight factor in at least another rate rise.

 

[penti99]

to use equity or not to use equity from ppor to buy ip

if small rate increase will make you unable to pay, then you better not get into the game and save some more, or get a better pay job ? you also need to have funds to cover unexpected, repairs, etc.

Hi,
Put in the price of the property + solicitors costs + stamp duty + LMI, searches, reports etc.

So you have a total cost - what you have to put in = the amount you need to borrow.

Multiply this by the interest rate. This is your yearly cost.

Take this amount and add ongoing costs eg rates, insurance, strata, property management fees etc

This is the amount your property will cost you each year. Take away the rent which will give you the final cost.

You may also be able to deduct depreciation which is a tax break that doesn't involve you spending anything.

Hope that makes sense. So in effect you work out all the outgoings and deduct it from the ingoings (rent). If it's negative you get tax deductions.
This of course does not include things breaking etc.
If money is tight factor in at least another rate rise.

----------------
thanks long and travel bug ...

so if its negative geared ... i would tax deductions ... ie ( pay less on my gross income ) --

on the other hand ...

if its positively geared ...

pay tax

so if thats the case ... its better with a little negative gearing ....

to save on tax ...

rather to pay more tax by getting an IP ...

2) to use equity or not to use

i have equity bulit up on my ppor - Is it better to use this or advisable not to use this to buy IP ...

whats the relation between using it and buying an IP - tax wise ...

if its not advisable to use it ...

how to structure my IP loan

ie borrow enough to cover ( stamp duty + reg costs and other expenses)

or

refinance the ppor loan ( which I am looking to do anyway ...) and borrow more ...

i tried speaking to banks - couple of them -- but they are too busy to explain ...

any mortgage consultants out there ...

 

[Lamingtons]

Penti99 - Why don't you contact one of the MB here on this forum and set up a meeting to establish how much you really can borrow and afford. Also speak to an accountant to explain to you cash flow and neg gearing and whether you will benefit from neg gearing.

Been reading your threads and without being rude, it seems like you are really really wanting an IP but you might jeopardise your PPOR if you encounter a few months of vacancy (you were looking at country properties), a few interest rates hike. I'm not a member with a lot of IPs, i'm also new in this 'game'. But I do know that IPs take a long time to turn over and sell. Costs of entry and exit are also quite high, solicitors, stamp duty, REA commissions, CGT.

 

[Blitzkrieg]

Education is key Penti99

Asking questions is fine as long as you understand the answers.

I would strongly suggest getting a couple of beginners real estate books (or borrowing from local library) and really having the basics down pat before you move on any deals you may have in mind.

Of course saving on tax sounds good, but you only get your tax rate back on what you spent ie. $1000 out of your pocket negatively geared may get you back $300 on your tax return (on a 37,001-80,000 income), so you are still out of pocket 700, on the other hand if the house is positively geared by $1000, you only have to pay $300 in tax, you are physically $700 cash better off. I have no idea of your personal financial position but there is obviously more than just "saving on tax or paying tax"

And then there's what to do with capital growth and how to access it...

And 1000 other big and small factors that you either instantly dismiss or instantly allow for each time you look at a deal.

Learn, then earn.

 

[penti99]

yes - u are right

Penti99 - Why don't you contact one of the MB here on this forum and set up a meeting to establish how much you really can borrow and afford. Also speak to an accountant to explain to you cash flow and neg gearing and whether you will benefit from neg gearing.

Been reading your threads and without being rude, it seems like you are really really wanting an IP but you might jeopardise your PPOR if you encounter a few months of vacancy (you were looking at country properties), a few interest rates hike. I'm not a member with a lot of IPs, i'm also new in this 'game'. But I do know that IPs take a long time to turn over and sell. Costs of entry and exit are also quite high, solicitors, stamp duty, REA commissions, CGT.

Education is key Penti99

Asking questions is fine as long as you understand the answers.

I would strongly suggest getting a couple of beginners real estate books (or borrowing from local library) and really having the basics down pat before you move on any deals you may have in mind.

Of course saving on tax sounds good, but you only get your tax rate back on what you spent ie. $1000 out of your pocket negatively geared may get you back $300 on your tax return (on a 37,001-80,000 income), so you are still out of pocket 700, on the other hand if the house is positively geared by $1000, you only have to pay $300 in tax, you are physically $700 cash better off. I have no idea of your personal financial position but there is obviously more than just "saving on tax or paying tax"

And then there's what to do with capital growth and how to access it...

And 1000 other big and small factors that you either instantly dismiss or instantly allow for each time you look at a deal.

Learn, then earn.

hi guys

u are right

I am trying to find good mb's to have a proper discussion

and trying to read some books on Investing ...

btw I have a mate who want to enter into IP market ... so most probably its going to be on both names ( to ease out everything and face unexpected as well )

once we understand it , we can buy on our own ....

and we would be going for fixed rate - 3 years ( to take care of that part )


thanks guys

sri

thanks for ur advice

 

[wally]

Gee you need to do a lot more research and learning before you make any investment decisions.
In my opinion,
- all other things being equal (potential growth etc), a positively geared property is better then negative regardless of tax
It's an investment you want to make money as your main goal not just reduce tax, you sound like you may dismiss a property if there is no negative gearing.
- I would not buy my first investment property with a mate, just too many opportunities for things to go wrong.
Things change, the mate might need the money in a few years time, you might not be able to buy out his part, hundreds of other things. Also it reduces your buying power next time in the view of a lender. They could see you as being liable for the whole mortgage with only 50% of the rent return.