Things you should know before you start.
Monthly Cash Flow - this is the figure of how much money is balance after you have paid all the expenses related to your property. This includes the mortgage and all the running expenses. If you select the correct property you will have a result as in this simulation, a positive Cash Flow. In this example, after all expenses your property will return $242 per month.
Cash on Cash Return - is an indicator of how much you earn as a percentage on the capital you have invested. When you buy an investment property the cash you will invest is the deposit and the cost such as stamp duty etc. This percentage tells you how much you earn every month in Cash. This is not a future income, it is instead a current assured income.
Purchase Cost - This is the amount of costs associated with buying a residential home. It normally consists of Stamp Duty, Registration, Solicitors fees and other adjustments that may be required at the time when you settle on the property. This amount is on top of your deposit and must be available in cash.
Total Cash Needed - This is the total cash you will require to buy an investment property. It consists of the Purchase Costs plus the deposit you have decided to put towards your investment purchase. These two amount would be considered your Capital.
Cash Flow Before Tax CFBT - This is the amount of Cash flow available after all the expenses have been deducted, including the Loan payment. In this simulation the CFBT is 15% of the net rent you receive after Vacancy Loss. It is important to always have a buffer for a period of time after the completion of your investment home, during which when you will not have a tenant, as it may take a couple of weeks to find one.
Financial Analysis - In this simulation there are some very interesting Financial Measures and Investment Ratios that are relevant to making a good decision. The more knowledge you have the more confident you will be when making a decision to invest into property. Make an appointment with us at Invst Australia to take part in specialised investment education sessions.