Hi Guys
After much consideration and some helpful advice from some of you here on the forum about our original plan to buy, reno then sell IP's, we have decided to change direction and buy & hold.
Found a property (which would be our first IP) and am wanting to put an offer in. Its a 1977 BV with 3 bedrooms, 2 bathrooms, 2 car garage and listed for $215K. Deceased estate. Agent told us they would sell for $200K so i have been basing my calculations on the $200K but am having trouble working out if it will be costing me money, neutral or putting money in my pocket. Agents property manager says it would rent out for $260 per week.
Below is what i have come up with. Am i barking up the wrong tree with these figures in regards to TAX DEDUCTIONS & DEPRECIATIONS.
Allowed total costs to be $210K (incl stamp duty, legals)
Deposit of $42K from LOC @ 5.23%
80% Loan = $168K @ 5.23%
Claimable Expenses below:
Interest on loan = $10,983
Agents fees = $1518 (8% + 2 weeks rent) Based on 48 weeks per year
Rates = $2200 (Council and Water)
Insurances = $1000? approx (Building, Contents & Landlord)
Maintenance = $1000? approx
Total Expenses = $16701
Rental Income = $12480 (based on 48 weeks)
So i am $4221 per year/ $81.17 per week out of pocket. So at this point it is negative. But beyond this point is where i am not so sure what TAX DEDUCTIONS & DEPRECIATION do to the equation. I have worked out something below and was wandering if you guys could steer me in the right direction if i am correct, sort of correct or totally wrong.
Currently my taxable income is $62K without any IP.
Tax payable would be $12,627.(incl 1.5% Medicare Levy)
With IP above my total income would be $74480 ($62000 + $12480 rent)
Taxable Income = $57779 ( $74480 income minus $16701 expenses)
Tax payable = $11,191 (incl 1.5% Medicare Levy)
$12,627 - $11,191 = $1,436 difference.
So does this mean that originally i was $4221 negative for the year but now i would only be $2785 negative for the year.
I havent factored in anything for depreciation but on a BMT calculator it suggested a first year deprciation of $1200. So does this come off the taxable income further reducing my holding costs?
Hope i have explained my situation clearly enough.
regards
RTF
After much consideration and some helpful advice from some of you here on the forum about our original plan to buy, reno then sell IP's, we have decided to change direction and buy & hold.
Found a property (which would be our first IP) and am wanting to put an offer in. Its a 1977 BV with 3 bedrooms, 2 bathrooms, 2 car garage and listed for $215K. Deceased estate. Agent told us they would sell for $200K so i have been basing my calculations on the $200K but am having trouble working out if it will be costing me money, neutral or putting money in my pocket. Agents property manager says it would rent out for $260 per week.
Below is what i have come up with. Am i barking up the wrong tree with these figures in regards to TAX DEDUCTIONS & DEPRECIATIONS.
Allowed total costs to be $210K (incl stamp duty, legals)
Deposit of $42K from LOC @ 5.23%
80% Loan = $168K @ 5.23%
Claimable Expenses below:
Interest on loan = $10,983
Agents fees = $1518 (8% + 2 weeks rent) Based on 48 weeks per year
Rates = $2200 (Council and Water)
Insurances = $1000? approx (Building, Contents & Landlord)
Maintenance = $1000? approx
Total Expenses = $16701
Rental Income = $12480 (based on 48 weeks)
So i am $4221 per year/ $81.17 per week out of pocket. So at this point it is negative. But beyond this point is where i am not so sure what TAX DEDUCTIONS & DEPRECIATION do to the equation. I have worked out something below and was wandering if you guys could steer me in the right direction if i am correct, sort of correct or totally wrong.
Currently my taxable income is $62K without any IP.
Tax payable would be $12,627.(incl 1.5% Medicare Levy)
With IP above my total income would be $74480 ($62000 + $12480 rent)
Taxable Income = $57779 ( $74480 income minus $16701 expenses)
Tax payable = $11,191 (incl 1.5% Medicare Levy)
$12,627 - $11,191 = $1,436 difference.
So does this mean that originally i was $4221 negative for the year but now i would only be $2785 negative for the year.
I havent factored in anything for depreciation but on a BMT calculator it suggested a first year deprciation of $1200. So does this come off the taxable income further reducing my holding costs?
Hope i have explained my situation clearly enough.
regards
RTF