Investment Property Calculator - Amount Approximations

Investing in property is one very good business decision should you make your mind up to have your money grow. However, like all big business actions, investing needs some planning, consulting, and other preparatory work like the investment property calculator. 

In a sentence, this calculator can provide you an estimate on how much an investment property will cost.

It can give you an estimate of the amount of cash you will need (or maybe receive for a given period) so you can fund your investment property. Aside from this, it can also give you an indication of the changes in the amount of taxes you will have to pay because of your ownership of the property.

When you combine these two important considerations, it can give you a measure of the after-tax profit (or loss) associated with owning your property.

Additional details

Among its many other details, the calculator combines the cost operating revenue and the cash operating expenses with the change in the amount of income tax paid. This is to measure the net change in your income mainly due to your ownership of the investment property.

However, you need to recognize that these results are rough estimates.  You should not treat them as financial advice. It is always advisable to consult your financial adviser before making any investment decisions.

With the use of the property calculator, there are many assumptions that you need to follow in order to get the results, all of which are approximations that are nearest to the actual figures. 

Assumptions

The first of these assumptions is that your cash operating expenses are assumed to be evenly spread throughout the year. In other words, your cash operating expenses are the same for each month of your first year.

Further, it is assumed that you have an interest only loan. This means your loan repayments only consist of the interest for the period. They should be deductible for tax purposes.

Tax paid

During the calculations, “change in tax paid” means only the marginal tax that is applicable to Australian residents are used. The calculator does not include the Medicare Levy (1.5%). However, it does not take any other factor that can influence the amount of tax to be paid.

(This would include such items as HECS contributions, any rebates, deductions, levies and surcharges into account.)

Other considerations

A building allowance is calculated for investment properties built after July 18, 1985. Those whose constructions falls between 19/7/85 and 15/9/1987, the building allowance is 4% of the cost fro 25 years after it had been built.

For properties where construction began in 15/9/87, the building allowance is 2.5% of the construction cost, for 40 years after construction.

The calculator does not consider the depreciation allowance from the depreciable items contained in the investment property. This may accrue to the owner of the investment property.

Cash flow is the revenue in cash, minus the expenses. This is rental income minus the loan repayments and operating expenses. For the Brisbane investment property calculator, you will receive this amount if it is positive or the amount you pay if this is negative.