Let’s just go through all the above fields first before you start using the calculator.
- Property price is the advertised price of the property for sale.
- 10 yr. avg. annual capital growth is the average percentage change in the median price over the last 10 years.
- Vacancy rate is the percentage of all available house, and units in a rental property such as apartment complex, that are vacant or unoccupied at a certain period.
- LVR (Loan to Value Ratio) is the amount you need to borrow to acquire the property.
- Deposit is the available amount you must have to use as initial payment to buy the property.
- Stamp duty is the amount you pay the government as tax for buying the property.
- Solicitors & etc are costs for legal services, documents, and other costs.
- Purchase cost or upfront cost is the total amount of cash required to purchase the property.
- Rent per week is the expected rental return paid per week.
- Gross rental yield is the expected rental return in percentage.
- Council, strata or body corp, water, insurance, property management, and interest from loan are monthly recurring costs for holding an investment property.
- Monthly loan repayment is the amount you pay the bank based on the interest rate on your loan.
- Cashflow before tax is the amount of profit that your investment property is making after deducting all the cash expenses related to your real estate investment. A positive cash flow investment property is a real estate property that is generating more money than what it costs monthly or annually.
- Projected property value based on average capital growth is the forecasted value of your investment property in 5, 10, 20, or 30 years. A suburb with an average annual capital growth of 8% is expected to double the median property price in 10 years.
Now that you understand what those fields are, you can start using the calculator.
All Non-Gray fields have been pre-populated with numbers. The Stamp Duty is Automatically calculated for each State. You can always update the pre-populated fields later or anytime you want.
Real estate is generally a great investment option. It can generate ongoing passive income and can be a good long-term investment if the value increases over time. You may even use it as a part of your overall strategy to begin building wealth.
However, make sure you are financially ready before you start investing in real estate. Because for one, you will need to put down a significant amount of money upfront to begin real estate investing. Buying a home, apartment complex, or piece of land can be expensive. Not to mention the ongoing maintenance costs you’ll be responsible for, as well as the potential costs that you will need to cover if you are between tenants for a time.
Calculating the return on your investment property is an important exercise that most investors tend to forget. We wouldn’t put our money in a long term deposit with a bank without having some idea of what return they will be paying us, right? Investing in a property should be no different. Knowing how much you will get back and what the return on your investment will be will make you a smarter investor and could just lower your risk.
Below is a list of the most important things to consider before committing to an investment property.
- Home Deposit – This is usually 20% of the agreed purchase price of the property.
- Monthly Mortgage/Home Loan Repayments – If you have a mortgage then you are obviously going to have to make mortgage repayments.
- Rental Yield – This is used for assessing a property you want to purchase and for tracking how your investment properties are performing.
- Cashflow – This is the rental income returned from the property which can either be positive or negative.
- Vacancy Rate – This is where we take into account vacancies. You can look up the vacancy of an area in a property investment magazine. Note: 2 weeks vacancy is the usual minimum expectation (anything less is amazing!)
- Council Rates – These are the rates you will have to pay to the council. It pays for things like rubbish collection and maintaining the local area.
- Recurring Costs – This includes water, insurance, and property management.
- Legal fees – This includes stamp duty, solicitors, & others.
- Body Corporate or Strata Fees – If you have purchased a unit (or even a townhouse/villa) you will likely have to pay body corporate fees. This goes to a governing body and is generally used to maintain or improve the common areas.
- Projected Property Value Based on Capital Growth – This is the potential increase in a property’s value over time.
People are finding our All-in-One Investment Property Cashflow Calculator so easy to use to help with their day to day research on properties that will provide them with the best return with high rental yield, low vacancy rate, good capital growth and good cashflow at the same time.
Remember, Smart property investors always crunch their numbers to determine if it’s worth investing or not. Are you one of them?