Hi there,
I’m currently doing some sums for a potential investment property to work out the approx shortfall per week/per annum.
I’m new to this process, so I’ve taken the approach of Incoming vs outgoing to calculate the shortfall.
In regards to the figures below I need an approx figure for;
Outgoings
– Cost for landlord insurance
Incoming
– The approx amount I would expect to receive on my tax return (including negative gearing and depreciation). My salary is $87k p/a.
If anyone can help that would much appreciated.
Rgds
Wayne
<table style=”border-collapse: collapse; width: 327pt;” width=”435″ border=”0″ cellspacing=”0″ cellpadding=”0″><colgroup><col style=”mso-width-source: userset; mso-width-alt: 6769; width: 143pt;” width=”190″ /> <col style=”mso-width-source: userset; mso-width-alt: 4096; width: 86pt;” width=”115″ /> <col style=”mso-width-source: userset; mso-width-alt: 2304; width: 49pt;” span=”2″ width=”65″ /> </colgroup>
<tbody>
<tr style=”height: 14.4pt;”>
<td class=”xl63″ style=”height: 14.4pt; width: 143pt;” width=”190″ height=”19″>Property 1</td>
<td class=”xl72″ style=”width: 86pt;” width=”115″></td>
<td style=”width: 49pt;” width=”65″></td>
<td style=”width: 49pt;” width=”65″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Purchase price</td>
<td class=”xl69″>$400,000.00</td>
<td class=”xl66″></td>
<td class=”xl66″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Stamp duty</td>
<td class=”xl69″>$15,000.00</td>
<td class=”xl67″></td>
<td class=”xl67″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″>$415,000.00</td>
<td class=”xl66″></td>
<td class=”xl66″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td class=”xl65″ style=”height: 14.4pt;” height=”19″>Outgoing</td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Strata</td>
<td class=”xl69″>$1,000.00</td>
<td class=”xl64″></td>
<td class=”xl64″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Rates</td>
<td class=”xl69″>$1,500.00</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>landlord Insurance</td>
<td class=”xl69″>?</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Water</td>
<td class=”xl69″>$1,500.00</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Interest</td>
<td class=”xl69″>$21,580.00</td>
<td class=”xl74″>5.20%</td>
<td class=”xl74″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td class=”xl68″></td>
<td class=”xl68″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Per annum</td>
<td class=”xl70″>$25,580.00</td>
<td class=”xl68″></td>
<td class=”xl68″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Per week</td>
<td class=”xl71″ style=”border-top: none;”>$491.92</td>
<td class=”xl68″></td>
<td class=”xl68″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td class=”xl68″></td>
<td class=”xl68″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td class=”xl65″ style=”height: 14.4pt;” height=”19″>Incoming</td>
<td class=”xl69″></td>
<td class=”xl68″></td>
<td class=”xl68″></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Rent (per week – agent fees 9%)</td>
<td class=”xl69″>$400.40</td>
<td class=”xl76″ align=”right”>$440</td>
<td class=”xl75″>p/w</td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Approx neg gearing/tax return</td>
<td class=”xl69″>?</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Approx depreciation return</td>
<td class=”xl69″>?</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Per annum</td>
<td class=”xl70″>$20,820.80</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Per week</td>
<td class=”xl70″>$400.40</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″></td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td class=”xl65″ style=”height: 14.4pt;” height=”19″>Short fall</td>
<td class=”xl69″></td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Per annum</td>
<td class=”xl73″>$4,759.20</td>
<td></td>
<td></td>
</tr>
<tr style=”height: 14.4pt;”>
<td style=”height: 14.4pt;” height=”19″>Per week</td>
<td class=”xl73″>$91.52</td>
<td></td>
<td></td>
</tr>
</tbody></table>Sorry – the copy and paste of the excel table didnt work… please click to see the image
https://drive.google.com/file/d/0B8Wvhp4OD-xQWWlRRkxmcGxFNkk/edit?usp=sharing
Hi Wayne
Welcome aboard :-)
For LL insurance I’d budget for around $800 p.a
With the interest rate, might be worthwhile using an inflated rate due to the current historical lows we’re experiencing – maybe factor in a 7% rate to be conservative. However, if you’re after a snapshot of how the numbers stack up right now – then use your current rate (5.2% seems a tad high though).
I’ve got a spreadsheet that helps crunch the numbers to – not sure if it helps but it’s available here http://passgo.com.au/investment-property-analysis-tool.html
Cheers
Jamie
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This reply was modified 10 years, 7 months ago by
Jamie Moore.
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
If you are after a precise figure, it might be worth including your other purchasing costs such as building and pest inspections, and solicitor/conveyancing fees
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Jamie & JacM,
Thanks for the reply. Your website is a useful resource:) If you don’t mind I think I will build on your spreadsheet. This is what I’m looking for, especially with the ability to forecast for 5 yrs.
At the moment we have around $350k equity and we plan to stay put for 10yrs+ so the strategy I’m looking at is long term. I’d like to acquire as many properties as we can with the equity we have.
The only issue we have is that we are equity rich, though cash poor. Hence I’m considering borrowing the shortfall for a 5 year period with the assumption that after 5 years the property’s rent would have increased enough to be positive, or at least nuetural. Can I ask your thoughts on the above as a strategy?
In regards to loans I’ve been considered ANZ’s 5yr fixed loan (IO) which is around 5.8%.
Rgds
Wayne
Hi Wayne
No worries – go for it. Can you flick me a copy once you’re done?
I wouldn’t fix for 5 years. Personally, I think it can be a dangerous move – especially in the world of property investing.
Firstly, you’re at the mercy of ANZ credit policy for the next 5 years. So if you want to release equity – and they say no, you’ll have to pay high break costs to refinance to another lender.
It’s also hard to plan 5 years in advance. Your situation might change – and you could find yourself in a position where you need to sell or refinance. Either of those situations will result in high break costs.
I generally advise to not fix for longer than 3 years as it’s a period of time that you can plan for – you have a good idea of where you’ll be sitting 3 years from now…..but 5 years is just a bit too long.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Cheers – will do Jamie:)
In regards to releasing equity – can this not be done as a line of credit? eg, so you end up with two seperate loans and you don’t have to refinance the first?
In regards to break costs, I’ve heard this can work in your favour. Eg, if the rates go up and the bank can get a high return they break with no fee or may pay you. (Had this happen with my parents on a block of land)
My concern is that I feel rates will go up, and when they do I maybe forced to jump to a higher rate – consuming the chance of reaching a positive return. (Guess these are all things to consider)
Appreciate the advice, regardless. I noticed your a broker, do you do assessments for Perth based clients?
Rgds
Wayne
Hi Wayne
You can still release equity – but if for some reason ANZ doesn’t want to play ball, you’ll be left having to refinance to another lender.
Usually you end up paying break costs – especially if breaking with a long fixed term.
Yep – I do assessments for Perth clients :-) Around 80% of my clients are based interstate – quite are few from this forum.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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This reply was modified 10 years, 7 months ago by
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