Question reg. cash flow

[Edmond Dantes]

Hi all,

this is a quick question and very basic!!! I've read few posts where people mention the cost of holding their properties per week (i.e., this ip is costing me 100 per week). Are these calculations generally made after tax or pretax? I know how much mine costs pre/after tax, but I'm just curious as to what the posters mean.

thanks!
Andrew

 

[BayView]

Some talk about pre-tax, some after tax.

I think most would be quoting pre-tax.

You really want to look at your pre-tax cost - this is an over-estimate of holding costs, so that the tax return is the extra bonus, and it is good if you can ignore it and pour it all back into the loans.

 

[Nathan]

i only ever look pre tax... tax return is a bonus...

 

[Witzl]

Agreed..... plus when people are comparing numbers to other people on the forums, its easier to give pre-tax numbers, as everyone has a different tax position.

Like Bayview, my plan is to use tax returns to tip some money back into the loans, and my weekly cashflow is all worked out pre-tax.

 

[undercover]

But if people use the Tax Variation form with the ATO (I presume most people with IP's do to max cashflow) to recieve the refund each pay packet instead on once a year I would have thought his would affect this??

 

[Ana]

Hi Andrew,

When we look at how much a property is costing us we take into account all costs not just loan repayment, but all maintenance, management, insurance, council, water, etc. We work out the total cost per week/month and then take away any income to find out the true cost of a property per week/month.

When talking with people we generally speak pre tax as a lot of people have different tax arrangements and we also treat depreciation as a bonus.

Wishing you every success,

Ana

 

[boomtown]

But if people use the Tax Variation form with the ATO (I presume most people with IP's do to max cashflow) to recieve the refund each pay packet instead on once a year I would have thought his would affect this??

No. That only affects how much cash you have in your bank account not what your outgoings and incomings are.

 

[undercover]

No. That only affects how much cash you have in your bank account not what your outgoings and incomings are.

I'm still right unless people remember to minus that variation from there outgoings

 

[BayView]

I'm still right unless people remember to minus that variation from there outgoings

I agree with you there UC.

If you have a variation, this means your tax return, which I wouldn't normally include, is part of the weekly cashflows.

But, as it is classed as income, I always like to under-estimate income and over-estimate expenses. So I don't include it for that reason. No nasty surprises.

If your cashflows work without having to factor in, or rely on, the variation - then you in a good cashflow position.

Also, I don't have a variation set up - I get the big pressy at the end of the year. I like to see the cheque come in. But that's just me. So for me, I can't include the variation in the cashflows as I don't actually have it until tax return time.

 

[jasper]

I've found most people quote pre tax. It is clearer to the general population.