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Advice on my cash flow calcs

Discussion in 'Property Finance' started by Late_Starter, 22nd Jul, 2016.

  1. Late_Starter

    Late_Starter Member

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    24th Jun, 2016
    Posts:
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    Location:
    Melbourne
    Hi Guys,

    Trying to make sure I've got my head around everything before buying my first IP. I want to make sure I am calculating my cash flow correctly so I know exactly what I am signing up for. Below is what I think accounts for all costs (except I just realised I haven't included any borrowing costs for the LOC. Please let me know what you think. Spreadsheet also attached.

    LVR 88%
    Principal $400,000
    Loan Amount $352,000
    Mortgage Insurance Genworth $5,034
    Loan Amount + LMI $357,034
    Monthly Repayments $1,339
    Interest Rate 4.5%

    Buying Costs
    Deposit $48,000
    Stamp duty $19,070
    Registration of land transfer $1,029
    Registration of Mortgage documents $225
    Building/Pest Inspect $400
    Conveyancing costs $1,200
    Loan approval / application $600
    Total Buying Costs $70,524

    Equity Loan $71,000
    Monthly Repayments $266
    Interest Rate 4.5%

    Rental Income pw $380
    Rental Income pm $1,647
    Rental Return 4.94%

    Monthly Costs
    Property Management 6% pm $99
    Repairs 10% pm $165
    Land Tax pm $48
    water pm $19
    Rates pm $153.75
    House Insurance pm $80.00
    Letting fee pm $137.22
    Land Lord Insurance pm $62.50
    Rubbish Collection pm $20.92
    Depreciation per month $666.00
    Total Monthly Costs $1,450.27
    Net Rental Income $196.39


    Equity Loan pm $266.25
    IP Loan pm $1,339
    Total Interest on Borrowings $1,605.13

    Cash flow ($1,408.73)
     

    Attached Files:

  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If it is your first IP why is land tax applicable?

    Seems like you have included everything.

    What about the tax side - if you want to calc post tax cashflow.
    - What about depreciation
    - Borrowing costs such as LMI

    Tax saved can be added back. The non cash deductions could turn that negative into a positive
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Actually you have depreciation - but this is not a cost you pay but a non-cash costs, something you can claim without 'paying' it.
    Taking that out would mean the pretax cashflow is just $742 negative.

    Include the LMI, the depreciation and work out the taxable loss

    Then work out on your marginal tax rate what that means in tax savings and then add this figure to $742 loss and that would give you the post tax cashflow
     
    Perthguy likes this.
  4. Late_Starter

    Late_Starter Member

    Joined:
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    Posts:
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    Location:
    Melbourne
    Hi @Terry_w ,
    When we rented out our PPOR for a year, SRO hit us up for land tax. SRO in VIC states that land tax payable on all property excluding PPOR, over $250k.
    LMI is on line 4, used Genworth calculator
    Depreciation is on line 37, used BMT calculator for the example

    For tax back I subtracted the rental loss from my gross income, calculated the tax and in this example my tax reduced by $521 pm, which would still leave me out of pocket $887.
     
  5. Late_Starter

    Late_Starter Member

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    Sorry posted the last one before I saw this, I will have a look at that now.
     
  6. Late_Starter

    Late_Starter Member

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    @Terry_w Thanks! Of course the depreciation shouldn't be in the monthly costs. Recalculated and it's now $221 negative, which makes much more sense! Now I have a template. Thanks for your help. :)
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Ah yeah a low land tax threshold in VIC!
     
  8. Luca

    Luca Well-Known Member

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    I would also add a bit of vacancy allowance to the SS, also letting fees look a bit high.