Equation to calculate required rent

Discussion in 'Property Information Resources & Tools' started by devank, 2nd Sep, 2015.

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  1. devank

    devank Well-Known Member

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    Inner West - Sydney
    A friend asked me to give her a simple equation to see if a potential IP will cost her considering deprecation.
    So... here we go. I used a bit of higher school algebra to come up with the answer.
    upload_2015-9-2_12-7-6.png

    So roughly, the rent needs to be $(12 * Property Price - 100* Depreciation)/10,000 per week to have break-even cash-flow.

    I thought it might interest few here as well.
     
    devank, 2nd Sep, 2015
    #1
    Hanison, neK and D.T. like this.
  2. D.T.

    D.T. Specialist Property Manager Business Member

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    Who said we'd never use maths again after we completed school :)

    So, assuming depreciation is 0 (old properties), formula simply becomes 0.0012 * purchase price.

    So in the example of one of mine 0.0012 x 147,000 = $176 to break even, which is good because it rents for $255 :D
     
    D.T., 2nd Sep, 2015
    #2
  3. devank

    devank Well-Known Member

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    Inner West - Sydney
    I guess the question is... Are the assumptions still valid for those old properties?
     
    devank, 2nd Sep, 2015
    #3