All Topics / Help Needed! / Assessing cash flow position

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  • Profile photo of SpongySpongy
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    @spongy
    Join Date: 2013
    Post Count: 22

    I've read quite a few comments about assessing CF and I think it makes sense to look at the total purchase price of the property plus costs as the starting point.

    Therefore, using the following example, advice would be great as to whether or not this is oversimplifying the calculation (and in fact that it's correct!).

    PP plus costs (SD, legals etc) = $572K

    Gross rent: $29,640

    Expenses (PM, rates, water, insurance, repair allowance): $8,090

    Interest expense on PP plus costs: $28600 (using 5% which is probably too conservative, but let's just run with it for this purpose)

    CF: 29640-8090-28600 = -$7050

    Depreciation: $11,500

    OK, this is the bit I really need clarified… Can I then just add the negative cash flow position (which will be a tax deduction) and the depreciation and multiply this by the marginal rate to ascertain after tax cash flow?  ie. (7050+11500) *0.385% = $7142 (tax payable reduction) – therefore -$7050+$7142 = $72 CF+ in 1st year???

    Thanks heaps

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