The Questions

I asked myself the below listed questions before I bought my first investment property:

  • Can I afford an investment property?
  • Should I buy this property for investment?
  • Will this property be a negative gearing investment property?
  • What the tax deductions I can get from investing on this rental property?
  • How much do I need to pay out of pocket on a weekly basis for this investment property?
  • What the cash flow will be for this investment property?
  • How much the capital gain tax will be if I sell this rental investment property?
  • What the net after tax profit I will make from selling this property?
  • What is the rate of return on investment based on purchase price or cash investment?

The Solution

I spent lots of time to search for a good investment property calculator that can estimate the cost, tax deductions, capital gain, return on investment, cashflow etc of rental investment properties but couldn't find one although there were many property investment calculators available at different prices.

In early 2008 I created an investment property calculator in Excel spreadsheet for my own personal use in order to help me with my rental property investment analysis. I used this investment property calculator workbook on several potential properties located in Sydney. In late 2008, I bought an one bedroom investment apartment in Sydney South and secured an interest only loan including 100% of the property purchase price ($315,000) plus of the stamp duty etc. This investment property started as a negative gearing property. When the home loan interest rate was as low as around 5.00% in 2009, it became a positive cash flow property. With the mortgage interest rate went back close to the normal range of about 9%, this property once again became a negative gearing investment property. However, even at that interest rate I only need to pay less than $70 per week to control this property. The property valuation report from Ubank showed the value of this investment property has gone up to $560,000 by now which means that I have an unrealised capital gain of $245,000 in this property.

Several friends of mine have tried this investment property calculator in Excel and found it is helpful by saving their time to do all the manual paper calculations. They also felt that they had made informed decision because the calculator provides them a lot of information on what costs they should factor in when purchasing investment property and lets them simulate how the return on investment (ROI) changes when the costs and rental change.

The Website

In year 2009, I decided to provide a simple version of this property investment calculator free for download, and this site was born. The free investment property calculator suits people who are starting to look into property investment. If you think you are ready to buy, you might want to buy other versions of the investment property calculator before you make your final decision.

In the last 10 years or so I gradually developed more products based on feedback from property investors. Now property investors can purchase the Standard, the Professional, or the Ultimate version of the investment property calculator at $59, $99, and $199 respectively. The prices are very reasonable because comparable property investment analysis tools in the market right now are selling for at least more than $400. I also offer up to more than $300 free bonus (see the table below) when you purchase the paid versions mentioned above. This means that you will get more value than the price you pay. For example, you only pay $199 for the Ultimate investment property calculator but you can get a package worth of more than $800 (including bonus calculators not listed below).

Version Free Bonus Value Total Bonus
Standard Version 1. Lifetime Free Update $59 $59
Professional Version 1. Simple Negative Gearing Affordability Calculator
2. Lifetime Free Update
Ultimate Version 1. Negative Gearing Affordability Calculator
2. Investment Property Evaluation Spreadsheet
3. Investment Property Management Spreadsheet
4. Lifetime Free Update

The Standard, Professional, and Ultimate investment property calculators offer a lot of more features and are more powerful than the free property calculator. They generally allow you to understand how your investment properties perform over 30 years from year to year. You can change lots of assumptions which you cannot do with the free version. To find which one suits you best and to compare the different versions, please see Investment Property Calculators Comparison. You can view some screenshots of the standard investment property calculator or the professional investment property calculator.

From time to time I will be adding Free calculators in Excel to this website. Some recently released free Excel spreadsheet calculators include Individual Tax Calculator Australia - estimates your monthly, fortnightly, or weekly tax, Credit Card Consolidation Calculator - analyses whether you should consolidate your debts, Rent or Buy Spreadsheet Analysis Calculator - shows "should you rent or buy a property", Mortgage Amortisation Schedule Excel Spreadsheet - creates mortgage amortization schedule with/without extra payments, Mortgage Calculator Australia - calculates mortgage repayment interest only or principal and interest, Property Loan to Value Ratio Calculator, and Property Rental Yield Calculator.

In April 2012, I decided to make two more free investment property calculators by simplifying the paid NRAS and SMSF calculators - the free NRAS investment property calculator and the free SMSF property investment calculator. The free NRAS property investment calculator suits investors who invest in properties under the National Rental Affordability Scheme (NRAS) scheme. The free SMSF property calculator is for investors who want to invest in properties through a Self Managed Super Fund (SMSF).

You can find all kinds of positive comments on my calculators - paid or free. If you find any calculator useful and want to provide positive feedback or you would like to provide feedback on how we can possibly improve any calculator, please let me know.

Since the establishment of this website, we have been able to serve valuable customers from different countries. Our customers are not limited to individual property investors. We have many commercial clients such as wealth creation consulting firms, real estate agencies, property investment education organizations, CPAs, etc. Many of our happy customers have told us they like us because of the useful tools and excellent customer service we offered! You can read the feedback here.

I do love to build Excel spreadsheet calculators or tools, so if you have an idea for a calculator that you think would be a good fit for this site or useful for youself and a few friends of yours , please feel free to contact me and let me know what it is.

My Personal Experience

Before I can make a decision on an investment property, I want to know two very basic things:

(1) if I can afford to buy an investment property, and

(2) if I buy such a property and sell it after a few years, can I make a reasonable good return on my investment?

I don't care how much tax I can get back from ATO, I don't care the net presence value of the money that I can get back when I sell the property, I don't care the inflation rate, but I DO care if the ROI on this investment property is higher than the interest rates from the banks! You should be able to follow me on this - if the ROI is even lower than the banks' interest rates it is no point to waste the time and efforts to invest a rental property.

So I believe the simple the calculator is the better it can help me on choosing investment properties.

Just use the example shown in the free Property Investment Calculator. You can download this Investment Property Spreadsheet for free.

Let's start with if I can afford this property. I have to pay $546.71 on a weekly basis for this property. Does my salary can cover this plus all the current living costs even if there is no rental income? It is important to consider the worst case. If I cannot pay without rental income, the property might be seized by the bank. If I don't have enough savings to pay the cost at the worse case that I am out of job and don't receive rental income for 3 months, I will not buy that property.

Now suppose I keep this property for three years and its value is up by 12%, what the ROI will be. The calculator shows the ROI is 95.27% - it costed me about $18,489 in total for the 3 years and brought back about $17,615 net profit (after tax and costs) for me. I believe this is a good return.

Of course, I have to validate the main assumption of 12% value increase by looking at the sold price data of same type properties in the same area. I also need to check with local council to see if there are any plans that might affect the future value of the property. After doing all the works, I believe this property is a good one to buy and then I buy it.

This investment property calculator does not only work with negative gearing properties, it also works with positive cash flow properties. For example, if for the same property you can get a $600 rental income per week, you will have a weekly positive income of $46.40 after tax and costs.

I hope this example can help you to understand this rental property investment calculator better. If you have any questions regarding this calculator, please let me know.

You might want to buy a rental property for investment because someone told you that you can get more tax refund if the property is a negative gearing one (which means you lose money on it). This is SO not true! A negative gearing investment property costs you money no matter how much more tax refund you can get back from ATO (Australian Taxation Office) if you don't get certain amount of capital gain when you sell it.

Tips to Buy the Right Investment Property

By choosing the right investment property though, it will ensure the returns on properties are much more substantial.

For a long term investment, one must look at buying property in the major cities of Australia. In the smaller capital cities, try and stay within a 10 km radius of the CBD. For Melbourne and Sydney, one can go out to a 15 km radius. It is important to understand that one wants the investment property to be in a built up established area so when the economic downturns do come, one can have the investment in a solid area, and not out in the mortgage belt which will suffer the most.

Look for property that adjoins well-to-do (moderately rich) suburbs, as given time, the surrounding suburbs will be absorbed and taken for the ride. Once you have found a suburb that you are happy with, look for properties that are around the median price value for that suburb. You don't want to purchase the cheapest, nor do you want the most expensive. We want to be in the middle. Being the cheapest and the most expensive one just makes you difficult to find a tenant.

So do you want a house or a unit? Each has their pros and cons and it really is a personal choice. If you are new to investing and have limited funds, then you may want to buy a unit. If you have plenty of equity in which to invest it may be wiser to buy a freestanding house. Just remember at the end of the day it is the land component that appreciates in value, while the building depreciates.

If you do purchase a unit, try and find one in a small complex of no more than 16. Go for something nice and boring, but is close to the cosmopolitan lifestyle and you won't go wrong. Remember to ensure the unit is greater than 50 meters square, or otherwise you will have trouble getting finance from any lender.

One has to look for property that does not lie on a main road, but rather two or three streets back from one. Near a school and a shopping complex is great too, but not directly across the road from one either.

Go to an area that you like, and get a feel for the area. It's amazing what you can pick up with your intuition. If you wish, ask people you know who live in the area what they like and dislike about it. You'll soon have an idea if this is a good area or not.

Once you are completely happy with an area you can refine your search to properties that are on the market. You can both research and find properties yourself, or pay for the services of a buyer's advocate. If you are short of time and skill, it may be best to engage the service of an advocate. It is a one off fee and generally tax deductible.

It is very important to always remeber this: buy the best property that you can afford. With the compounding effect over the years, your investment will far outperform those that are any less. If you are not so sure what could be the best property, you need to read this article again!