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Positive vs. Negative Analysis
Here are three copies of the same spreadsheet under different scenarios.
A property worth $65,000 is being considered, with a loan being taken out
to cover the non-cash components at 8% interest-only.
The first scenario is a typical positively geared one - a large enough
deposit is being taken out to return a positive return from year 1, given a
rental stream of $100 / wk. The second scenario is a typical negatively
geared one - a 10% deposit is used, and as a result the initial returns
are negative, and are tax-deductable, for a few years until the property
"turns positive". The last scenario is similar to the previous two, except
the rental stream is $125 / wk while the capital growth is correspondingly
lower, and gives much better returns that either of the other scenarios.
Download the original Excel spreadsheet.
Return to previous page.
Positive Gearing Scenario
| Positive |
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| |
House price |
|
$65,000 |
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Yield |
8.00% |
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| |
Rent per week |
|
$100 |
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| |
Interest rate |
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8% |
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| |
House appreciation (on CPI) |
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3% |
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| |
Rent appreciation (on CPI) |
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2% |
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| |
Risk-free investing (on CPI) |
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2% |
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| |
Management fee |
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6% |
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| |
Repair costs |
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4% |
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# weeks vacany / yr |
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2 |
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Deposit |
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$9,000 |
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Marg. Tax Rate |
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43% |
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| |
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IO Loan payments |
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$4,480 |
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| |
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| Year |
House value |
Annual rent |
Costs |
Profit/Loss |
Invested Profits |
|
|
20yr return |
$46,749.74 |
ROI |
519.44% |
| 1 |
$65,000.00 |
$5,000.00 |
$4,980.00 |
$20.00 |
$20.00 |
|
|
25yr return |
$58,530.81 |
ROI |
650.34% |
| 2 |
$66,950.00 |
$5,100.00 |
$4,990.00 |
$110.00 |
$130.40 |
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| 3 |
$68,958.50 |
$5,202.00 |
$5,000.20 |
$201.80 |
$334.81 |
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| 4 |
$71,027.26 |
$5,306.04 |
$5,010.60 |
$295.44 |
$636.94 |
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| 5 |
$73,158.07 |
$5,412.16 |
$5,021.22 |
$390.94 |
$1,040.62 |
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| 6 |
$75,352.81 |
$5,520.40 |
$5,032.04 |
$488.36 |
$1,549.80 |
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| 7 |
$77,613.40 |
$5,630.81 |
$5,043.08 |
$587.73 |
$2,168.53 |
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| 8 |
$79,941.80 |
$5,743.43 |
$5,054.34 |
$689.09 |
$2,900.98 |
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| 9 |
$82,340.06 |
$5,858.30 |
$5,065.83 |
$792.47 |
$3,751.47 |
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| 10 |
$84,810.26 |
$5,975.46 |
$5,077.55 |
$897.92 |
$4,724.42 |
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| 11 |
$87,354.56 |
$6,094.97 |
$5,089.50 |
$1,005.47 |
$5,824.38 |
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| 12 |
$89,975.20 |
$6,216.87 |
$5,101.69 |
$1,115.18 |
$7,056.05 |
|
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| 13 |
$92,674.46 |
$6,341.21 |
$5,114.12 |
$1,227.09 |
$8,424.26 |
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| 14 |
$95,454.69 |
$6,468.03 |
$5,126.80 |
$1,341.23 |
$9,933.97 |
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| 15 |
$98,318.33 |
$6,597.39 |
$5,139.74 |
$1,457.65 |
$11,590.31 |
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| 16 |
$101,267.88 |
$6,729.34 |
$5,152.93 |
$1,576.41 |
$13,398.52 |
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| 17 |
$104,305.92 |
$6,863.93 |
$5,166.39 |
$1,697.54 |
$15,364.03 |
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| 18 |
$107,435.10 |
$7,001.21 |
$5,180.12 |
$1,821.09 |
$17,492.40 |
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| 19 |
$110,658.15 |
$7,141.23 |
$5,194.12 |
$1,947.11 |
$19,789.35 |
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| 20 |
$113,977.89 |
$7,284.06 |
$5,208.41 |
$2,075.65 |
$22,260.79 |
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| 21 |
$101,267.88 |
$6,729.34 |
$5,152.93 |
$1,576.41 |
$24,282.41 |
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| 22 |
$104,305.92 |
$6,863.93 |
$5,166.39 |
$1,697.54 |
$26,465.60 |
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| 23 |
$107,435.10 |
$7,001.21 |
$5,180.12 |
$1,821.09 |
$28,815.99 |
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| 24 |
$110,658.15 |
$7,141.23 |
$5,194.12 |
$1,947.11 |
$31,339.42 |
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| 25 |
$113,977.89 |
$7,284.06 |
$5,208.41 |
$2,075.65 |
$34,041.86 |
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Negative Gearing Scenario
| Negative |
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| |
House price |
|
$65,000 |
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Yield |
8.00% |
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| |
Rent per week |
|
$100 |
|
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| |
Interest rate |
|
8% |
|
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|
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| |
House appreciation (on CPI) |
|
3% |
|
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| |
Rent appreciation (on CPI) |
|
2% |
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| |
Risk-free investing (on CPI) |
|
2% |
|
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| |
Management fee |
|
6% |
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Repair costs |
|
4% |
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# weeks vacany / yr |
|
2 |
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Deposit |
|
$6,500 |
|
Saved $2500 here |
|
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Marg. Tax Rate |
|
43% |
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| |
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IO Loan payments |
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$4,680 |
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Lost $4000 here |
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| Year |
House value |
Annual rent |
Costs |
Profit/Loss |
Invested Profits |
|
|
20yr return |
$42,058.29 |
ROI |
647.05% |
| 1 |
$65,000.00 |
$5,000.00 |
$5,180.00 |
-$102.60 |
-$102.60 |
|
|
25yr return |
$52,310.27 |
ROI |
804.77% |
| 2 |
$66,950.00 |
$5,100.00 |
$5,190.00 |
-$51.30 |
-$155.95 |
|
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| 3 |
$68,958.50 |
$5,202.00 |
$5,200.20 |
$1.80 |
-$157.27 |
|
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| 4 |
$71,027.26 |
$5,306.04 |
$5,210.60 |
$95.44 |
-$64.98 |
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|
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| 5 |
$73,158.07 |
$5,412.16 |
$5,221.22 |
$190.94 |
$124.66 |
|
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| 6 |
$75,352.81 |
$5,520.40 |
$5,232.04 |
$288.36 |
$415.52 |
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| 7 |
$77,613.40 |
$5,630.81 |
$5,243.08 |
$387.73 |
$811.56 |
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| 8 |
$79,941.80 |
$5,743.43 |
$5,254.34 |
$489.09 |
$1,316.88 |
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| 9 |
$82,340.06 |
$5,858.30 |
$5,265.83 |
$592.47 |
$1,935.68 |
|
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| 10 |
$84,810.26 |
$5,975.46 |
$5,277.55 |
$697.92 |
$2,672.31 |
|
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| 11 |
$87,354.56 |
$6,094.97 |
$5,289.50 |
$805.47 |
$3,531.24 |
|
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| 12 |
$89,975.20 |
$6,216.87 |
$5,301.69 |
$915.18 |
$4,517.04 |
|
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| 13 |
$92,674.46 |
$6,341.21 |
$5,314.12 |
$1,027.09 |
$5,634.47 |
|
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| 14 |
$95,454.69 |
$6,468.03 |
$5,326.80 |
$1,141.23 |
$6,888.39 |
|
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| 15 |
$98,318.33 |
$6,597.39 |
$5,339.74 |
$1,257.65 |
$8,283.82 |
|
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| 16 |
$101,267.88 |
$6,729.34 |
$5,352.93 |
$1,376.41 |
$9,825.90 |
|
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|
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| 17 |
$104,305.92 |
$6,863.93 |
$5,366.39 |
$1,497.54 |
$11,519.95 |
|
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| 18 |
$107,435.10 |
$7,001.21 |
$5,380.12 |
$1,621.09 |
$13,371.44 |
|
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|
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| 19 |
$110,658.15 |
$7,141.23 |
$5,394.12 |
$1,747.11 |
$15,385.98 |
|
|
|
|
|
|
| 20 |
$113,977.89 |
$7,284.06 |
$5,408.41 |
$1,875.65 |
$17,569.35 |
|
|
|
|
|
|
| 21 |
$101,267.88 |
$6,729.34 |
$5,352.93 |
$1,376.41 |
$19,297.14 |
|
|
|
|
|
|
| 22 |
$104,305.92 |
$6,863.93 |
$5,366.39 |
$1,497.54 |
$21,180.62 |
|
|
|
|
|
|
| 23 |
$107,435.10 |
$7,001.21 |
$5,380.12 |
$1,621.09 |
$23,225.32 |
|
|
|
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|
|
| 24 |
$110,658.15 |
$7,141.23 |
$5,394.12 |
$1,747.11 |
$25,436.93 |
|
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|
|
| 25 |
$113,977.89 |
$7,284.06 |
$5,408.41 |
$1,875.65 |
$27,821.32 |
|
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"Good Deal" Scenario
| Good Deal |
|
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| |
House price |
|
$65,000 |
|
Yield |
10.00% |
|
Increased 2% here |
|
|
|
| |
Rent per week |
|
$125 |
|
|
|
|
|
|
|
|
| |
Interest rate |
|
8% |
|
|
|
|
|
|
|
|
| |
House appreciation (on CPI) |
|
1% |
|
Reduced 2% here |
|
|
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|
|
| |
Rent appreciation (on CPI) |
|
2% |
|
|
|
|
|
|
|
|
| |
Risk-free investing (on CPI) |
|
2% |
|
|
|
|
|
|
|
|
| |
Management fee |
|
6% |
|
|
|
|
|
|
|
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| |
Repair costs |
|
4% |
|
|
|
|
|
|
|
|
| |
# weeks vacany / yr |
|
2 |
|
|
|
|
|
|
|
|
| |
Deposit |
|
$9,000 |
|
|
|
|
|
|
|
|
| |
Marg. Tax Rate |
|
43% |
|
|
|
|
|
|
|
|
| |
|
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|
|
|
|
|
|
|
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| |
IO Loan payments |
|
$4,480 |
|
|
|
|
|
Gained $20,000 here |
|
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| |
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| Year |
House value |
Annual rent |
Costs |
Profit/Loss |
Invested Profits |
|
|
20yr return |
$61,802.58 |
ROI |
686.70% |
| 1 |
$65,000.00 |
$6,250.00 |
$5,105.00 |
$1,145.00 |
$1,145.00 |
|
|
25yr return |
$85,189.80 |
ROI |
946.55% |
| 2 |
$65,650.00 |
$6,375.00 |
$5,117.50 |
$1,257.50 |
$2,425.40 |
|
|
|
|
|
|
| 3 |
$66,306.50 |
$6,502.50 |
$5,130.25 |
$1,372.25 |
$3,846.16 |
|
|
|
|
|
|
| 4 |
$66,969.57 |
$6,632.55 |
$5,143.26 |
$1,489.30 |
$5,412.38 |
|
|
|
|
|
|
| 5 |
$67,639.26 |
$6,765.20 |
$5,156.52 |
$1,608.68 |
$7,129.30 |
|
|
|
|
|
|
| 6 |
$68,315.65 |
$6,900.51 |
$5,170.05 |
$1,730.45 |
$9,002.35 |
|
|
|
|
|
|
| 7 |
$68,998.81 |
$7,038.52 |
$5,183.85 |
$1,854.66 |
$11,037.06 |
|
|
|
|
|
|
| 8 |
$69,688.80 |
$7,179.29 |
$5,197.93 |
$1,981.36 |
$13,239.15 |
|
|
|
|
|
|
| 9 |
$70,385.69 |
$7,322.87 |
$5,212.29 |
$2,110.58 |
$15,614.52 |
|
|
|
|
|
|
| 10 |
$71,089.54 |
$7,469.33 |
$5,226.93 |
$2,242.40 |
$18,169.21 |
|
|
|
|
|
|
| 11 |
$71,800.44 |
$7,618.72 |
$5,241.87 |
$2,376.84 |
$20,909.43 |
|
|
|
|
|
|
| 12 |
$72,518.44 |
$7,771.09 |
$5,257.11 |
$2,513.98 |
$23,841.60 |
|
|
|
|
|
|
| 13 |
$73,243.63 |
$7,926.51 |
$5,272.65 |
$2,653.86 |
$26,972.30 |
|
|
|
|
|
|
| 14 |
$73,976.06 |
$8,085.04 |
$5,288.50 |
$2,796.54 |
$30,308.28 |
|
|
|
|
|
|
| 15 |
$74,715.82 |
$8,246.74 |
$5,304.67 |
$2,942.07 |
$33,856.51 |
|
|
|
|
|
|
| 16 |
$75,462.98 |
$8,411.68 |
$5,321.17 |
$3,090.51 |
$37,624.15 |
|
|
|
|
|
|
| 17 |
$76,217.61 |
$8,579.91 |
$5,337.99 |
$3,241.92 |
$41,618.56 |
|
|
|
|
|
|
| 18 |
$76,979.79 |
$8,751.51 |
$5,355.15 |
$3,396.36 |
$45,847.28 |
|
|
|
|
|
|
| 19 |
$77,749.59 |
$8,926.54 |
$5,372.65 |
$3,553.89 |
$50,318.12 |
|
|
|
|
|
|
| 20 |
$78,527.08 |
$9,105.07 |
$5,390.51 |
$3,714.56 |
$55,039.04 |
|
|
|
|
|
|
| 21 |
$75,462.98 |
$8,411.68 |
$5,321.17 |
$3,090.51 |
$59,230.33 |
|
|
|
|
|
|
| 22 |
$76,217.61 |
$8,579.91 |
$5,337.99 |
$3,241.92 |
$63,656.86 |
|
|
|
|
|
|
| 23 |
$76,979.79 |
$8,751.51 |
$5,355.15 |
$3,396.36 |
$68,326.35 |
|
|
|
|
|
|
| 24 |
$77,749.59 |
$8,926.54 |
$5,372.65 |
$3,553.89 |
$73,246.76 |
|
|
|
|
|
|
| 25 |
$78,527.08 |
$9,105.07 |
$5,390.51 |
$3,714.56 |
$78,426.26 |
|
|
|
|
|
|
|
|