How long do you think until my property becomes cashflow positive?

Viewing 6 posts - 1 through 6 (of 6 total)

dgabriel
Member
@dgabriel
Join Date: 2007
Post Count: 12
May 21, 2009 - 12:33 am
I'm not sure how to calculate this. I brought my first property in 2001, I still owe $180,000 on a variable interest rate currently 5.58% and I receive rental income of currently $978 per month. Not sure what other factors I need to consider. I've worked hard and I would like to be able to travel overseas knowing the the rental is covering the mortgage payments. How many years off this do you think I would be?
Thanks for your help.
Dan.
maree_bradross
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@maree_bradross
Join Date: 2007
Post Count: 401
May 21, 2009 - 1:08 am
do you get a depreciation schedule done from a QS?
Richard Taylor
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@qlds007
Join Date: 2003
Post Count: 12,024
May 21, 2009 - 1:14 am
Negotiate the rate down this will save you 0.5% plus switch to an interest only loan with 100% offset account if not already.
Richard Taylor | Australia's leading private lender
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
May 21, 2009 - 3:20 am
Looks like you are getting around $225 per week. Repayments would be $193 pw. Allow say 20% for costs = $231 pw in costs.
Now factor in non cash deductions – depreciation of fittings, depreciation of building, loan costs, travel costs and you will probably be making a loss and saving some tax as well.
So your property probably is cashflow positive after tax. Even before tax it is almost neutral. Get the rate down a bit and you will be posiitve. Put the rent up a bit when you can and you will be making money each week.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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dodo_lurker
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@dodo_lurker
Join Date: 2009
Post Count: 25
May 21, 2009 - 5:02 am
Hi Terry,
Was just wondering, for the sake of calculating +CF, where does tax on rental income come into it? For instance, in the OP's situation, should his CF be based on the rent he receives minus costs, or the rent received minus tax minus costs?
Or is the theory simply that the amount of deductions should outweigh any tax owing on the rent?
Cheers.
StumpCam
Member
@stumpcam
Join Date: 2006
Post Count: 76
May 21, 2009 - 5:50 am
It's pretty simple DodoL; you just look at your net income (ie after tax) with the property compared to your net income without it. It should be greater with the property if you are CF+. The reduction in tax you pay if you're negatively geared, or the increase in tax you pay if you're positively geared is just part of the bottom line, ie your net income after tax. The change in your net income will vary with your personal exertion income, as it changes your marginal tax rate.
Hope this makes sense. SC.