Crunch the numbers
To start your property buying strategy it’s important to establish your annual tax after income. How much do you want to make each year to lead the lifestyle you want? Find that sweet spot and stick with it. Once you have a number in mind, you can move onto the next phase of your planning.
The average gross yield for property in a good Australian suburb is roughly 4.5%. So if you own a property with $1 million, you’re likely to earn around $45,000 a year. But don’t forget there’s still plenty of other expenses to take care of for your investment property. There are council rates and commission rates for real estate agents.
Maintenance and repairs can also set you back each year. Maintenance costs can vary depending on how old your house is or what condition it’s in. On top of all these expenses, you’ll need to pay taxes on your rental income. These taxes include income tax and capital gains tax. But keep in mind that there may be tax offsets that you could be eligible for.
The total sum of your maintenance costs and taxes could end up leaving you $10,000 out of pocket. So if you were aiming to earn over $100,000 a year from a rental income, you would need a property portfolio worth over $4 million.