All Topics / Help Needed! / Working out rental yield and after tax cashflow?

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  • Profile photo of Stella1258Stella1258
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    @stella1258
    Join Date: 2007
    Post Count: 45

    Hi
    I dont know how much info I need to be able to roughly work out how much a property is costing, after tax. I have seen this formula (somewhere?) to work out rental yield & wonder if this the way to work this out….

    Rental per week times 5200 (being 52 weeks in a year times 100 to get a percentage) divided by the purchase price; e.g. ($125 per week x 5200) / $125,000 = 5.2% gross yield.

    I've been told approx. 2.5% of your gross yield is required to pay outgoings. For example, if your interest rate is 7% you need a gross yield of at least 10% (7% + 3%) to guarantee a cashflow neutral return (before tax).

    Ok I'm good so far with this – how do I work out our rough after tax weekly shortfall/gain?
    If we are on 30% tax rate & have first year deductions of around $6k?

    Guess I should have stayed in my maths classes a bit more

    Cheers

    Stella

    Profile photo of here to learnhere to learn
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    @here-to-learn
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    margaret lomas has free software you can download which is easy to use. you just fill in the figures and it works it out for you. you will need a bar code from one of her books though to access. librarys have copies of her books if you don't want to purchase one.

    Profile photo of Stella1258Stella1258
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    @stella1258
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    Great – Will have a look & see what I can find.
     
    thanx

    Profile photo of vyaw2003vyaw2003
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    @vyaw2003
    Join Date: 2006
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    I think that Taxable amount will depend on what you earn in your traditional job.
    if you are getting taxed at 45 cents, then a loss of a few $1000 is not the end of the world.
    surly you an figure estimates of outgoings and ingoings for a whole year.
    out~ bc rates insurance realestate maintence accountant fees if needed
    in~ rent

     my 100th post!!!

    Profile photo of Stella1258Stella1258
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    @stella1258
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    Thanks for the pointer – picked up one of Margaret Lomsa's books (from the library) & downloaded calculators – great little tools.

    Cheers

    Profile photo of here to learnhere to learn
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    @here-to-learn
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    yeah i thought so and so easy to use

    Profile photo of Jessica 8285Jessica 8285
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    @jessica-8285
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    Stella

    You wouldn't happen to have that bar code still handy ??

    If not il grab one of those books myself.

    I failed maths too :(

    Who'd have thought id need it for P.I one day haha

    Jessie

    Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
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    Another quick calc for you to go by;
    allow 20% of the rent to be eaten up by all holding costs (except loan interest) such as repairs, management, insurances and rates etc. This also includes 4 weeks vacancy, (and you probably won't use that bit).
    This is a slight over estimate, but if the numbers look good after this, you know you are going to be ok.

    Profile photo of Stella1258Stella1258
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    @stella1258
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    Jessie 8285 wrote:
    You wouldn't happen to have that bar code still handy ??

    Um sorry Jessie – didnt actually bring the book home – (just grabbed the barcode  off the book at the library) and its long gone sorry.

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