How much money do you need to invest in the Melbourne market?
Getting into property investing can be a tricky process, it’s often as much about what you can afford as where and what you should be buying.
Previously, Wakelin Property Advisory discussed how much it costs to get an entry-level investment grade stock in different areas of the Melbourne market. They gathered that around $400,000 is going to be the amount you’ll be looking for on the lower end of the market.
This time, Wakelin’s Jarrod McCabe speaks to Howitt Partners Mortgage & Finance’s Charles Howitt on exactly how much extra cash flow you need in the household budget to finance this sort of an investment.
Factoring in cash flow, mortgage repayments, expenses and some conservative assumptions around costs, they come up with the figure you need to have aside on a weekly basis to fund the property.
You can see their explanations in the video below. Remember, you will need to undertake your own calculations to see what works for your individual circumstances – this is a case study only.
{qtube vid:=ECR0sOBgSS8}
| $400,000 property | |
Marginal tax rate (+ Medicare levy) + Temporary Budget Repair Levy | Top (49%) | Second tier (39%) |
Gross annual rental income @ 3.5% | 14,000 | |
Management and other ongoing costs (25% of rental income) | 3,500 | |
Net annual rental income | 10,500 | |
Annual borrowing costs @ 5% interest only | 20,000 | |
Funding difference per annum before tax | 9,500 | |
Funding difference per annum after tax | 4,845 | 5,795 |
Monthly cost after tax | $403.75 | $482.91 |
Source: Wakelin Property Advisory