About the Can I Afford An Investment Property? Calculator
The Investment Property Calculator provides an estimate of how much an
investment property will cost.
It combines the cash operating revenue, rent, and the cash operating expenses, with
the change in the amount of income tax paid to measure the net change in the investor's
income due to owning the investment property.
It is important to recognise that the results are only rough estimates and should
not be treated as financial advice. Before making any investment decisions you should
consult your financial adviser.
- Cash operating expenses are assumed to be evenly spread throughout the year. This
means that the cash operating expenses are the same for each month of year 1.
- It is assumed the investor has an interest only loan. This means that the loan repayments
only consist of the interest for the period. It is assumed that they are deductible
for tax purposes.
- When calculating the "Change in tax paid" only the marginal tax rates applicable
to Australian residents are used. The calculator does incorporate the Medicare Levy
of 1.5 percent but does not take any other factors which can influence the amount
of tax paid, such as HECS contributions, any rebates, deductions, levies and surcharges
- A building allowance is calculated for investment properties constructed after 18
July 1985. For buildings where construction began between 19/7/1985 and 15/9/1987,
building allowance is 4 percent of the construction cost, for 25 years after construction.
For investment properties where construction began after 15/9/1987 the building
allowance is 2.5 percent 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, which may accrue to the owner of an
Explanation of Terms
Monthly Rental Income:
Monthly Rental Income is the rental income you receive each month. It can be increased
each year by inserting a growth rate in Potential Rental Growth per annum.
Monthly Loan Repayment:
Monthly Loan Repayment is the value of monthly loan repayments, assuming interest
Monthly Cash Operating Expenses:
Monthly Cash Operating Expenses is the total of the tax deductible expenses associated
with maintaining the property for the month. It increases by the growth rate input
in Annual Increase in Operating Expenses.
Cash Flow is the cash revenues less the cash expenses. That is Rental Income less
the Loan Repayments and Cash Operating Expenses. This measures the amount of cash
you will receive, if it is a positive number, or the amount you will have to pay,
if it is a negative number.
Annual Building Allowance:
Annual Building Allowance is the tax deduction which can be made for this property.
The rate at which building allowance can be claimed is determined by when the property
Annual Tax Profit/Loss on Property:
Annual Tax Profit/Loss on Property combines the cash flow generated by the property
with the tax deductions to determine the profit or loss for accounting purposes.
Building allowance reduces taxable income, the profit or loss for accounting purposes
will be lower than the cash flow generated.
Change in Tax Paid:
The Change in Tax Paid measures the change in the amount of income tax the investor
pays due to owning the investment property, compared to if they did not own the
property. This is calculated based on the annual taxable income from other sources
entered by the user. If the Change in Tax Paid is negative it means the user pays
less tax. If it is positive it means the user pays more tax, relative to if they
had not owned the investment property.
After Tax Profit/Loss on Investment:
The After Tax Profit/Loss on Investment combines the cash flow associated with the
investment property with the tax effect of owning the investment property to measure
the net effect of the investment. A positive number indicates a profit, a negative
amount indicates an after tax loss.