Can I afford an investment property?

Wondering if you can fit an investment property into your budget?

Your Mortgage’s Investment Property Calculator can provide an estimate of the income and expenses associated with owning an investment property.

From rental yields to negative gearing, it can measure the profit or loss associated with an investment property purchase, helping you decide whether it’s the right wealth-building move for you.

Property and mortgage information

Property price
$
Loan amount
$
Interest rate
%
Loan term
years

Income details

Rental income weekly
$
Annual salary, other taxable income
$
Annual rental increases
%

Cash expenses per annum

Repayments
Interest only
Council rates
$
Strata fees
$
Insurance
$
Property manager fees
$
Repairs and maintenance
$
Land tax
$
Water rates
$
Inflation
%

Your estimated results

Summary

Annual repayments (Interest only) $0
Total property income (per annum) $0
Other taxable income (per annum) $0
Annual rental income Year 1$0 Year 5$0 Year 10$0 Year 30$0
Annual repayments Year 1$0 Year 5$0 Year 10$0 Year 30$0
Annual cash expenses Year 1$0 Year 5$0 Year 10$0 Year 30$0
Cash flow before tax Year 1$0 Year 5$0 Year 10$0 Year 30$0
Tax benefit Year 1$0 Year 5$0 Year 10$0 Year 30$0
Cash flow after tax Year 1$0 Year 5$0 Year 10$0 Year 30$0

Should I buy an investment property?

Property investing is often viewed as lower risk than investing in other assets, such as stocks or managed funds. It’s also typically considered to be quite rewarding.

However, it’s important to understand that investing in property isn’t a guaranteed way to make money.

As with any other investment vehicle, you should ensure you understand the pros and cons of property investing to manage your portfolio effectively and reach your financial goals.

Can I afford an investment property?

Affordability is a top concern for many would-be property investors. Unlike other forms of investing, entering the property market typically requires a large sum of money.

Most banks and lenders require a property investor to have a deposit of at least 10% of the property’s value, with deposits of less than 20% likely attracting Lenders Mortgage Insurance (LMI).

And that’s just the beginning. When buying an investment property, investors will likely incur additional costs such as stamp duty, conveyancing fees, and mortgage application fees.

Once you’re in the market, it’s crucial to have the financial capacity to achieve your investment goals.

Identifying your priorities and creating a rough outline of your long-term financial strategy can be a beneficial way to prepare for buying an investment property. You can devise an investment strategy on your own or seek advice from a financial expert.


The investment home loan a property investor chooses can significantly impact their investment strategy. Here are some of the most competitive options available on the market right now.

Lender

Variable
More details
90% LVR
  • You MUST already have Solar or a documented plan to install within 90 days to be eligible for this loan
  • Available for refinance or purchase
  • No monthly, annual or ongoing fees
90% LVR

Solar Investor Loan (Principal & Interest) (LVR < 90%)

  • You MUST already have Solar or a documented plan to install within 90 days to be eligible for this loan
  • Available for refinance or purchase
  • No monthly, annual or ongoing fees
Variable
More details

Fair Dinkum Investment Home Loan (Principal & Interest) (LVR < 60%)

    Variable
    More details

    Variable Rate Investment Loan LVR < 80%

      Variable
      More details

      Express Investment Loan (Principal and Interest)

        Variable
        More details

        Everyday Investment Loan (Principal & Interest) LVR < 80%

          Important Information and Comparison Rate Warning

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 25, 2024.


          How does this calculator work?

          At Your Mortgage, we want to ensure you have the right tools to help you plan for your future.

          This calculator can provide an estimate of how much profit you might expect to yield from an investment property, after covering your mortgage repayments and other property-related expenses.

          If you’re not expected to earn a profit, it will consider whether you could realise taxation benefits from negative gearing.

          Here’s the information you’ll need to input in order for the calculator to work its magic:

          • The price of your ideal property

          • How much you expect to borrow

          • The interest rate on your ideal investment home loan

          • Your annual salary (to calculate any potential tax offsets)

          • How much rent you expect to charge each week

          The calculator will also ask you to input estimates of how much expenses like those below could come to:

          • Council rates

          • Strata fees

          • Insurance

          • Repairs and maintenance

          It’s important to note that the calculator assumes the interest rate, taxes, fees, and other costs related to your investment property won’t change during the time you hold it, which is unlikely in real life.

          How much tax do I have to pay on rental income?

          There are quite a few taxation aspects property investors should be aware of.

          Of course, an investor will likely pay tax on the purchase of a property, in the form of stamp duty. After that, any rental income will be considered taxable income.

          Depending on where an investor lives, they might also need to pay land tax and, of course, council rates. When they sell, they might need to pay capital gains tax on any profit made.

          However, property investors making an annual loss on their property might be able to utilize negative gearing to offset their loss.

          Here is a more detailed breakdown of some of the taxes you might face if you own an investment property:

          1. Income tax
            You will need to pay tax on any rental income you earn. However this can be offset by deductible expenses, such as home loan interest.

          2. Capital gains tax
            This tax is payable on any profit you make when you sell your investment property. If you’ve lived in the property for a period within six years of selling, however, you might be able to avoid the tax. Further, if you own an investment property for 12 months or more you might be eligible for a 50% capital gains tax discount.

          3. Property tax
            More commonly known as council rates, this tax goes straight to the local council. The amount you’ll need to pay will probably depend on your locality and the property’s land value.

          4. Land tax
            Both state and federal governments impose this tax. Land tax is calculated based on the combined, unimproved value of the land you own. It applies at different rates in each state or territory.

          The good news is you’re generally allowed to deduct certain property-related expenses from your tax. Property investors can claim deductions for several expenses.

          Key things to consider when it comes to deductions include:

          1. Acquisition and maintenance costs
            Acquisition and maintenance costs can typically be deducted against other taxable income, whether in the year they’re incurred or bit-by-bit over the following years.

          2. Depreciation allowances
            Property investors might also be able to minimise the tax they pay by claiming depreciation on newly-purchased items such as appliances, blinds, carpets, furniture, and hot water systems.

          3. Negative gearing
            Finally, when the annual cost of owning an investment is greater than the return a person is receiving, their property could be ‘negatively geared’. While negatively geared investments are, by nature, loss-making, their owner can generally deduct that loss from their gross income, reducing their tax liability.

          Investment Home Loan Guides

          Frequently Asked Questions

          There are several ways to invest in the property market. Two of the most popular methods are owning rental properties and flipping properties.

          Rental Properties

          Owning rental properties can provide passive income through rent. There are also tax benefits associated with owning a rental property. If you incur a loss on paper, you could take advantage of negative gearing. Additionally, if you own a property for more than 12 months, your capital gains tax liability could be reduced by 50%.

          Flipping Properties

          Flipping properties involves buying a property, adding value through renovation, and then selling it for a profit. This is typically a shorter-term investment strategy, and it comes with additional risks. Most notably, there’s no guarantee you’ll be able to sell the property for a profit.

          One of the most critical considerations when buying an investment property is location. Where you purchase can dictate how well your investment performs and influence the type of property you choose to invest in.

          When selecting the location of your investment property, consider the audience you are trying to attract. For instance, if you're aiming to rent out a property to professionals, an inner-city location might be ideal. On the other hand, if you want to rent to a family, you may want to look beyond the metropolitan areas and search in local suburbs.

          In addition to your desired tenant, consider the accessibility, infrastructure, nearby establishments, and potential environmental hazards of the area. For example, is there public transport nearby? This can be important if you’re targeting city commuters.

          Property investment has long been ingrained in Australian culture as a reliable and effective way to build wealth. Compared to other forms of investment, property investing offers several advantages:

          • Security and stability
            Property investments are generally considered more secure and stable compared to other investments.
          • Positive cash flow
            Rental income can provide a steady stream of passive income.
          • Tax benefits
            Investors can take advantage of various tax benefits, such as deductions for expenses and negative gearing.
          • Long-term potential
            Property investments can appreciate over time, providing significant long-term returns.

          According to the Australian Taxation Office (ATO), the income you receive from renting out part or all of your property is considered taxable income. This means it must be declared in your income tax return and is taxed at your marginal tax rate.

          However, rental income can be offset by expenses related to your investment property. If you incur an annual loss on your investment, you can utilise negative gearing to offset other taxable income.

          Return on investment (ROI) from a rental property is commonly referred to as rental yield. Put simply, rental yield measures the difference between rental income realised from an investment property and the overall cost of owning it.

          It's expressed as a percentage. The higher the percentage, the greater the return on investment.

          Rental yield can be expressed as either gross or net yield, with both calculated slightly differently.

          Gross yield is the annual rent as a percentage of the purchase price or value of a property.

          To calculate gross rental yield:

          1. Calculate the total annual rent the tenant is charged
          2. Divide this sum by the property value
          3. Multiply that figure by 100 to calculate the percentage of your gross rental yield

          Net yield is the income return on an investment after all expenses such as insurance, maintenance, and strata fees have been deducted.

          To calculate net rental yield:

          1. Calculate all expenses and add them together
          2. Calculate the total annual rent the tenant is charged
          3. Deduct the total expenses from the total annual rent
          4. Divide the resulting sum by the property value
          5. Multiply that figure by 100 to calculate the percentage of your net rental yield