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Basic Negative Gearingunderstanding cash flow

Investment Director – Marcus Westnedge

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Major Capital City Land Based Asset Returns

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year of pur-

chase

5 years 10 years

15 years

$-

$20,000.00

$40,000.00

$60,000.00

$80,000.00

$100,000.00

$120,000.00

$140,000.00

$160,000.00

Gearing Position

Current Debt Sevicing Rental Return Capital growth

Capi

tal V

alue

Purchase Price of $400,000

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Equity What is the equity position? PV – PD = Equity Position Rents Rental Per YearPP Purchase Price PV Present ValuePD Present Debt

PY Purchase year

Purchase Price of $400,000

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Equity $38,000

Rents $430 p/w x 52 weeks = $22,360

PP $400,000 (2010)

PV $430,000 (2013)

PD $392,000 x (Interest Rate) 7% = $27,440 i/o

PY 2010

Purchase Price of $400,000

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Equity $38,000

Rents $430 p/w x 52 weeks = $22,360

PP $400,000 (2010)

PV $430,000 (2013)

PD $392,000 x (Interest Rate) 7% = $27,440 i/o Note# Running costs ( Management fees, Council rates, Water rates, Insurance &

maintenance.

+ $6,000 (Running Cost) = Total outgoing $33,440

PY 2010

Purchase Price of $400,000

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Equity $38,000

Rents $430 p/w x 52 weeks = $22,360

PP $400,000 (2010)

PV $430,000 (2013)

PD $392,000 x (Interest Rate) 7% = $27,440 i/o Note# Running costs ( Management fees, Council rates, Water rates, Insurance & maintenance.

+ $6,000 (Running Cost) = Total outgoing $33,440$22,360 (rents) - $33,440 (total out) = $11,080+ Tax Benefits (average $70,000 income) $8,000

Your Cost -$11,080 (negative gearing Short fall) +$8,000 (tax) = $3,080

$59 p/w

PY 2010

Purchase Price $400,000

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Kitchen

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Living / Dinning Area

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Alfresco

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