Investment Calculator
AN investment calculator is an important tool used to evaluate your suitability to invest in a certain property. It is suggested that all potential property investors contact us for an accurate calculation before you even contemplate searching for the property you want to invest your money in, as this is a very important step in helping to make your investment plans succeed.
In the meantime we will try to impress on you the importance of using an investment calculator in such a way by describing here what you can expect to achieve.
An investment calculator, in indicating if you can or can not afford to invest in a certain property, will reach its conclusion by calculating the following data:
- cash operating expenses
- cash operating revenue
- rental income
- change in investors income as affected by the investment
- change in income tax payable.
Investment Calculator cash generalities
Operating expenses.
When calculating cash operating expenses the investment calculator assumes the expenses to be evenly effective throughout the year. This includes interest on loan repayments and their deductibility. It also means the annual expense cost is calculated to be evened out over each month of the year.
Operating revenue.
The rental income you receive each month is calculated as such less the loan repayments and cash operating costs. This gives you the amount of cash you can expect to receive that is taxable. If it is a negative number it will be the amount you can claim under negative gearing arrangements.
This figure can be calculated to change each year by inserting a growth rate figure.
Change in income as it effects taxation.
The investment calculator measures the change in income tax the investor is liable to pay as a result of buying the investment property compared to that paid before the property was purchased.
This amount is worked out from all the taxable income sources earned by the investor as entered into the calculator.
Marginal tax rates that apply to Australian citizens are used including the Medicare levy of 1.5 per cent.
The yearly building allowance tax deduction is dependent on the year the building was constructed, a feature already built into the investment calculator.
Investment Calculator accuracy.
The investment calculator can only be as accurate as the information given it. This means that it is very hard to claim 100 per cent accuracy because every mortgage loan will have different fees involved in its repayment regime.
The biggest unknown will be the in the area of expenses as ongoing costs are one of the hardest forward estimates to calculate accurately.
Expenses you will need to take into account are:
- Strata levies (if applicable).
- Sinking funds
- Property management fees (if using a property manager)
- Bank fees and charges
- Maintenance and repairs
- Land Tax
- Rates
If you can nail your expenses down accurately your calculations will be pretty close to the mark.
If your investment property is a residential property either new or established the Goods and Services Tax (GST) does not apply. If it is a commercial property and if you are already registered for GST payments you will include this tax payment in your rental charges. If not registered for the GST you will need to register if your total rent charged per annum is in excess of $50,000. If your rental income is less than $50,000 you can register for the GST voluntarily.
For the most accurate calculations of your ability to enter the investment property market, contact Home Loan Finder and have us help you with the calculations.
Related posts:
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- Mortgage Switching Calculator
- Rent vs Buy Comparison Calculator
- Refinancing Calculator
- Check Your Cash Flow Before Investing
- Which expenses can I prepay for my investment property
- Capital Gains Tax Calculator
- Stamp Duty Calculator
- First Home Buyer Calculator
- How Much Can I Borrow? Calculator
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