Our all-in-one investment property calculator can help you estimate:
- The deposit required for your purchase
- The cash flow,
- Tax position (Negative, neutral, or positive gearing)
- Capital gains tax payable when selling the property, and
- Your Return on Investment
Take the time to understand what the results mean, and you will be well ahead of the typical property investor.
You can also get a detailed summary of the analysis sent right into your email inbox when you’re done.
This is a slightly more advanced calculator, so if it starts to seem confusing, scroll down to the bottom where you will find our walkthrough case study example.
Note: The calculator is already pre-filled with an example which we will refer to in our case study below.
When you are ready to start your personalised analysis, just input your data in the fields and be on your way to becoming a more savvy property investor.
Try our Investment Property Calculator:
1. Australian Property Cost Summary
The first part of the investment analysis is to understand how much funds you would need (i.e. your initial investment) to acquire the property.
In the example above, the total cost to acquire the property was $990,514, inclusive of stamp duty, legal, and bank borrowing fees.
You obtained a $760,000 mortgage which was 80% of the purchase price.
Therefore your initial investment (contribution) is $230,514.
This calculation is also useful to perform if you want to know the total acquisition cost of a property transaction or how much cash you need for a deposit.
2. Annual Cash Flow Summary
Your property’s cash flow position equation is:
Rental income – Expenses = Net cash flow position
The cash flow summary is essential to know because it tells you whether this property is going to generate additional income or cost you money to hold.
In the example above, your annual rental income = $35,490 (Rental yield: 3.74% p.a.)
With expenses of:
- Mortgage interest: $24,168
- Council/water rates: $3,000
- Maintenance/strata: $3,500 (If you buy a house, it’s maintenance. If an apartment, it’s strata/body corporate fee)
- Tax return fee: $400 (Accountant’s service fee)
- Insurance premium: $500 (Building & contents, landlord’s insurance fees)
- Property management fee: $2,342 (based on 6.6% inc. GST of rental income)
- Land tax: $0 (You might have land tax if your land value exceeds the States threshold.)
Total property expenses = $33,910.
Therefore your net cash flow balance is $1,580—a positive number.
If you got a negative number that means expenses were higher than income, and you will likely need to supplement with some of your cash to keep your investment property running.
It’s important to understand that a negative cash flow property does not equal a bad investment.
So long as your property’s value increases at a reasonable rate of growth, cash flow takes a backseat on return on investment. We will explore this in more detail shortly.
Note: The above assessment assumes Interest Only repayment. If you are paying P&I on your mortgage, then your net cash flow position will be lower. Using the example, it would be -$13,592.92.
It’s a lower figure, as you will need to pay down your loan (principal) on top of the interest.
The great news is that all the expenses above are 100% tax-deductible.
Note: Only the Interest portion of your mortgage repayment is tax-deductible. The principal portion of your repayment is NOT tax-deductible.
3. Annual Tax Position Summary
Tax analysis estimates how much or how little income tax you will need to pay on the property.
You can also determine whether your investment is negatively or positively geared.
You can work this out by taking your Net Cash Flow position (which was already calculated) and applying any applicable tax incentives/write-offs.
The tax incentives are:
Building depreciation (written off at 2.5% p.a.)
- These are the structural elements of your property that are fixed to the building. Also commonly referred to as capital works deductions.
- Examples of assets that will qualify include walls, roof, tiles, built-in robes, cabinets, fixed bathroom fittings and vanities.
Plant/equipment depreciation (written off over the effective life of the asset. Average 7 years)
- These are the plant and equipment assets contained within the property. These are assets deemed to be mechanical or easily removed from the property as opposed to those that are permanently fixed to the structure of the building.
- Examples include carpet, blinds, ovens as well as less obvious items such as door closers.
Bank borrowing fees (written off over 5 years)
Your net cash flow position: $1,580
Less: Total tax incentives: $15,063
Your taxable income = -$13,483 (negatively geared)
Income tax payable = $0 (calculated at 32.5% non-resident tax rate)
If your taxable income is negative (i.e. taxable loss), that means your property is negatively geared and therefore, no income tax – and vice versa.
Any taxable losses you incur can roll over to the next year indefinitely, accumulating as ‘tax credits’.
You can use these tax credits to offset any future taxable income (usually when you sell the property and make capital gains, or if you work in Australia again and have taxable income).
So with the example above, after five years, you would have built up $67,415 in tax credits.
4. Capital Gains Tax Assessment
This section is about working out how much Capital Gains Tax (CGT) you need to pay when you sell your property.
Capital gains tax falls under your income tax despite being referred to as CGT.
Assuming you sold your property after it grew in value by 6.5% p.a. over five years, the sales price would be $1,301,582. (Your capital gains)
- Cost to acquire the property (Purchase price + Legal fees + Stamp duty) = $989,869.
- Tax credits you accumulated over the period of ownership = $67,415
- Building, plant/equipment depreciation claimed over the years +$74,670
Once you apply the necessary deductions and add-backs, your taxable capital gain is $318,968
As non-tax residents of Australia, your income will be taxed from the first dollar and at a higher rate. See table below on Foreign resident tax rates 2019–20
|Taxable income||Tax on this income|
|$0 - $120,000||32.5c for each $1|
|$120,001 – $180,000||$39,000 plus 37c for each $1 over $90,000|
|$180,001 and over||$61,200 plus 45c for each $1 over $180,000|
With two owners on the title of this property, your total CGT payable will be $107,218 calculated on the non-resident tax scale.
5. Return on Investment Analysis
With property, you can make a profit in two ways:
1. From rental income. (net cash flow)
2. From the sale of the property. (capital gains)
1. Rental income
As indicated in the cash flow assessment analysis, you had a positive cash flow of $1,580 p.a.
So over the five years of ownership of this property, your total cash position totalled $7,900.
From the tax position analysis, we determined that you didn’t have to pay any tax on this income so you get to keep all of that and we will count this $7,900 as part of your overall profits.
If this figure were negative, however, we would count that as a reduction in your overall profits.
2. Sale of property
You sold your property for $1,301,582 after five years of capital growth.
You would then have to pay CGT of $107,218 and discharge the mortgage of $760,000, leaving you with an after-tax sales profit of $434,364 which you get to take home.
Calculate your Return On Investment
Add the two profit figures together ($7,900 + $434,364) for a total net profit of $442,264.
Your ROI is calculated by dividing the net profit above by your initial investment.
Your initial investment, in this case, was $230,514 as determined in the very first calculation – Property Cost analysis.
Your ROI = 91.89% ($442,264 / $230,514)
Get On Your Way To Owning An Investment Property
Are you ready for the next step toward owning an investment property? If so, it’s time to get your mortgage preapproval and start researching properties in your desired area.
Ensure your financial stability is sound (we can help with that) and take your time to consider the housing market, taxes and whether you’d want to hire a property management company.
Work with an expert mortgage adviser to help you on your journey to buy your first or fifth investment property. Odin Mortgage can help you navigate deposit requirements, preapprovals and more.