What will be the cashflow from my property investment?

Any general questions you might have in regards to loans and finance.
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gleeson
Posts: 58
Joined: Mon Jun 15, 2009 12:15 pm

What will be the cashflow from my property investment?

Post by gleeson »

Hi forum,

I am planning on buying an investment property. The house costs $650,000 and I have around $110,000 for the deposit. This will be my first investment on a property. I am unsure about whether the investment would be a wise one.

I work for a university in Perth and have an annual income of $63,000. Could anyone give me an idea on what might affect my gains or losses over time?

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Otto Dargan
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Re: What will be the cashflow from my property investment?

Post by Otto Dargan »

Hi gleeson,

You can predict the weekly cashflow of your investment property by using the investment property calculator. You can enter the price of the property and your deposit, as well as your current income and the expected rental income to estimate the cashflow.

Most of the costs associated with the property are estimated by the calculator, and you will be able to get a general idea on your weekly cashflow. The weekly cashflow for the first, fifth, tenth and the thirtieth years are shown on the results page of the calculator.

Generally, investors with a high income may be able to benefit from negative gearing. Negative gearing is where you make a loss on the cashflow of your investment property and then claim that loss as a deduction when you lodge your tax return.

If the interest and the operating costs of your property are less than the income from the investment then you make a loss. For this loss you may be able to receive a tax refund against your other income. The rental income from the property and the value may grow more than the growth in expenses over time. This is what the investors are counting on while buying a negatively geared property.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

gleeson
Posts: 58
Joined: Mon Jun 15, 2009 12:15 pm

Re: What will be the cashflow from my property investment?

Post by gleeson »

Hi Otto,

Could you tell me more about the main costs of holding a property? Does the calculator that you linked to take all of these into account while calculating the cashflow?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
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Re: What will be the cashflow from my property investment?

Post by Otto Dargan »

Hi gleeson,

The calculator estimates the following costs for you if are unsure of what the costs will be:
  • Your loan repayments
  • Council rates
  • Property management fees
  • Building insurance
  • Water rates
  • Maintenance costs
  • Strata fees
However, there are some costs that the calculator does not take into account some of the costs such as:
  • Renovations
  • Landlords insurance
  • Contents insurance
  • Gardening costs
  • Bank fees
  • Changes in interest rates
  • Associated purchase costs
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

gleeson
Posts: 58
Joined: Mon Jun 15, 2009 12:15 pm

Re: What will be the cashflow from my property investment?

Post by gleeson »

As I said earlier, I have saved $110,000 for the deposit on my investment property worth $650,000. I have not given a thought to the ‘associated purchase costs’. What are these and how much can I expect to pay for these?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
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Re: What will be the cashflow from my property investment?

Post by Otto Dargan »

Hi gleeson,

You are seeking to borrow more than 83% loan to value ratio. When you are borrowing more than 80% of the property value then you may be required to pay a one-off Lenders Mortgage Insurance (LMI) premium. You can use the LMI Calculator to estimate the insurance premium that you may be required to pay across different lenders.

Apart from LMI premium, there are other costs associated with your loan. You should expect to pay around 5% of the property price for these government fees. You can use the Property Purchase Costs Calculator to get a more correct indication and breakdown of these costs. The costs included in the calculator are as follows:
  • Purchase stamp duty: This is the largest government fee. This is a tax levied by the state government for all property purchases.
  • Mortgage stamp duty: This is another tax levied by your state government and is based on the size of your mortgage. However, most states have abolished this tax.
  • Transfer fee: It is a fee charged to replace the name of the vendor with your name in the title of the property.
  • Registration fees: This fee is charged for registering the lender’s mortgage on the property title.
If you would like more help with this then you can call us on 1300 889 743 or fill out our free assessment form.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

sandysmith
Posts: 47
Joined: Thu Jun 27, 2013 9:19 pm

Re: What will be the cashflow from my property investment?

Post by sandysmith »

Hi everyone!

I am planning to take out a home loan too. I used the property purchase costs calculator and it gave me a general idea on the costs of my purchase. But it has been mentioned in this thread that the calculator takes into account government fees only.

What other non-government fees should I be expected to pay when I buy a property?

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Otto Dargan
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Re: What will be the cashflow from my property investment?

Post by Otto Dargan »

Hi sandysmith,

The other costs that you may need to pay while getting a home loan include:
  • Conveyancing costs: You will probably need to hire a conveyancer to handle the property transfer. It may be some amount between $800 and $1,500.
  • Inspections and reports: You may be required to have a building inspection, pest inspection or a strata report prepared. These can cost you up to $600.
  • Loan fees: You may need to spend up to $900 in the fees charged by the lender.
  • Lenders Mortgage Insurance (LMI): You may need to pay LMI if you are borrowing more than 80% of the property value.
In addition to these, you may need to pay for other costs like repairs, renovations, and council rate adjustments.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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