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Michael Pope

Blog post by Michael Pope

$350 Surplus Cash per week could equate to Millions

This month we focus on how you can use surplus cash of $350 per week to potentially control an investment property worth $450,000. It’s all in the numbers….let’s take a look.

  • Surplus Household cash $350 per week after expenses, commitments etc.
  • Purchase Price $450,000
  • Estimated Purchase Costs $22,500 (5%) includes stamp duty, set up costs etc.
  • Anticipated Loan $472,500
  • Interest on loan @ 7.1% = $33,547p.a. (Interest Only) – $645 per week.
  • Estimated Rent $18,000 p.a. or $346 per week.

So income is $346……outgoings are $645 p/w = Shortfall of $299 coming from household surplus. $51 dollars is set aside for miscellaneous provisioning, such as maintenance, property management services, possible owner’s corp. fees, etc.

Now the above ‘basic’ example doesn’t include tax benefits – so lest take a look, assuming 30 cent tax rate, in year 1 assessment terms……

Operating loss (Income of $18,000 less interest costs $33,547) in this basic example is a loss of $15,547. This is offset against taxed paid on your income, so you are rebated 30cents on every dollar – so the calculation is 15,547 x .3 = $4664. This will be rebated in your tax return. Therefore the cost to hold this investment property is further reduced by $89 per week. Meaning in this example the surplus cash to hold this investment property is not $299 p/w but $299 less $89 = $210 p/w.


Let’s make a few additional assumptions and look ahead 15 years from now.

Assumptions are: We only paid interest only on the debt – so the debt on the property is still $472,500. Therefore the interest p.a. @ 7.1% remains at $33,547 ($645 p/w)
Assume that we are able to increase rent by 5% p.a., so in 15 years the weekly rent is now $719 p/w. We are now cash flow positive on the property, meaning you could start paying off the loan or use that surplus income to further invest.

Furthermore and most importantly we need to factor in the growth value of this property – Let’s assume 7% p/a. So in 15 years the value of the property is now worth $1,241,564 OR what if the value of the asset was to grow at 10% p/a it would be worth $1,879,761 and then when you take away the debt you would be left with over $1.4 million in net worth, and it’s still growing and not costing you anything to hold! In fact, it’s bringing in cash flow every week, which is going to contribute handsomely to your retirement income and quality of life for the future.


Key messages:

1 – Work out your household surplus and put it to work by controlling something of far greater value
2 – Get help in picking the ‘RIGHT’ Property. The difference between 7% return and 10% return is $638,197 in 15 years (Imagine how long it would take to make this money working full time!) Pay to get an experienced person to help you.
3 – What if you have more surplus income, what are your possibilities then? Or less, are there still possibilities for you – Yes there is – get help. Come and meet with us to help you establish what’s possible for you by making a free no obligation appointment where we can help model where you’re heading now.

It’s your financial future at stake here, which means it’s also your quality of life and standard of living we are talking about. It’s up to you to take the first step.

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