Hi all,
I have a property figure like below
Current value: 380,000
Loan amount: 331,000
Equity: 49,000
Rental Income: 355 (PW) or 18,460 (PY)
Interest Rate: 6.15% fixed
Interest repayment: 20,356.50 (PY)
Hence the net cashflow is -1,896.5 ( ignore the maintainance/ management exp, and before deprication schedule)Question
the depreication schedule shown that the property has $7,847 for this year.
How do i calculate the net cash flow position ? do i add back 7,847 to -1,896.5 equal to +5950.5 ? so the property is cashflow positive ?
Thank you
Taylor
Income – Expenses
Rent = $18,460
Expenses
Interest = $20,365
Other (say 20% rent) = $3720
Total Cash expenses = $24,085Cashflow = income – cash expenses = -$5625 pa before tax.
Taxable Income includes non cash expenses
So expenses + Depreciation + borrowing expenses too.
= $24,085 + 7,847 = $31,932Taxable income = Rent – Deductions = $18,460 – $31,932 = $13,472 Loss
This loss will come off your other income.
If you were on the 37% marginal tax rate then you may get back 37% or nearly $5k.
Tax savings can be used to work out total cashflow.
Cashflow above was – $5625.
So after tax is taken into account it would be slightly negative.But this is estimating expenses such as insurance, rates, repairs etc and guessing your tax rate.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Depreciation is also not really a paper loss as you will have to eventually replace those items you are depreciating.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Taylor
Prior to answering your question a little more clarification is required with what you mean by "the depreication schedule shown that the property has $7,847 for this year."
Do you mean that you have $7,847 that is deductible this year for depreciation on the property or do you mean that there is $7,847 of capital items that are available to be depreciated for this year?
If it is the first case than with what Terry said depending on your marginal tax rate the property is going to be around the breakeven cashflow territory if not then you might find that property to still be in negative cashflow depending on how much depreciation is allocated for this year.
Regards
Maurice
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