single income investment scenarios
please note: scenarios for couples are very similar
SCENARIO 1
Mary borrows the whole purchase price of $325,000 and pays the outgoings of stamp duty of $9,800, mortgage registration fee of $120.50, transfer fee of $504.50, and solicitors fees of $600; a total of $11,025.00.
| ANNUALISED COSTS | ANNUALISED INCOME | |||
| Loan Interest only @ 4.99% for a lock-in rate over 3 years on borrowed funds of $325,000 | $16,218 | Annual Tax Cuts @ 30 cents in the dollar on the difference between annual income of $45,000 and new taxable income $30,658 | $4,303 | |
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| Rates (Council and Water) | $2,000 | Rent | $15,600 | |
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| Building Insurance and body corporate fees | $1,250 | |||
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| Landlord Protection Insurance | $250 | |||
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| Estate Agent Fees | $1,248 | |||
| Total | $20,966 | Total | $19,903 | |
| Total Income (Mary's Annual Income $45,000 plus rent $15,600) | $60,600 |
| Less | |
| Total Expenses (Annualized Costs $20,966 plus Non-Cash deductions refer to example depreciation schedule $8,976) | $29,942 |
| New taxable income | $30,658 |
Mary contributes $20.45 per week, after tax return,
diminishing to $0 by year 3.
diminishing to $0 by year 3.
Mary would receive tax cuts of $4,303 per annum is due to her combined tax deductions (shown above as Annualised Costs) - add them to her non-cash deductions, such as building and fittings depreciation of approximate worth of $8,976 (refer depreciation schedule), her total tax deductions would come to $29,942 ($20,966 + $8,976 non-cash deductions) per annum, yet her total rental income is only $15,600.
Mary would have to add the rental income to her annual salary of $45,000, bringing her new income to $60,600 ($45,000 + $15,600), and then she could subtract the $29,942 of deductions to bring her new "taxable income" down to just $30,658 ($60,600 - $29,942).
This means Mary could get a refund of the tax that she normally pays on the difference between $45,000 and $30,658 = $14,342. That refund would equate at 30 cents in the dollar to $4,303 per annum.
The difference between Mary's total Annualised costs and her total Annualized Income is the amount of money she would need to contribute from her pocket per annum. In this case it would be $20.45 per week or $1,063 per annum.
With rents increasing on average a net $10 per week or $520 per year, after increase in rates, water and insurance, and a percentage of agent's fees, it's not hard to see that within less than 3 years you are not contributing anything to the investment. You will however reap all the Capital Gains that will surely come your way.
Historical data illustrates that on average real estate doubles every 7 to 10 years creating a great capital gain on your investment.
PLEASE NOTE: You MUST make your own enquires regarding the contents of this page.
DISCLAIMER: No warranties or representations whatsoever are made by Aztec Developments (Qld) Pty Ltd regarding the accuracy of the information on these pages.
Professional advice should always be sought before making investment decisions.
Professional advice should always be sought before making investment decisions.
