Investment property cash flow: look beyond the weekly rent

An advertised weekly rent is not the amount available to pay a mortgage. Before buying an investment property, build a cash-flow picture that includes quiet weeks and unpleasant surprises as well as normal trading.

Start with realistic income

Use an evidence-based rental assessment and ask what assumptions it makes about condition and tenancy. Allow for vacancy rather than multiplying the highest advertised rent by every week of the year. A lender may assess rental income differently from your own forecast.

Separate ongoing costs from occasional work

List rates, landlord insurance, management fees where relevant, maintenance and any body corporate charges. Tenancy Services highlights the importance of appropriate rental insurance and landlords' repair responsibilities. Check the actual property and policy, not a generic percentage alone.

Plan separately for a significant appliance replacement or building repair. A property that appears cash-flow positive before maintenance can require regular contributions from your other income.

Run a downside scenario

For illustration, rent of $650 per week with four vacant weeks produces $31,200 over 48 weeks, before any expenses or tax. Compare that income with the full year's costs and debt payments. Then ask what happens if insurance rises or an urgent repair arrives during the vacancy.

Coordinate professional checks

• Ask an accountant about ownership structure and tax treatment.
• Ask a lawyer about title and tenancy documents.
• Discuss property condition and compliance with relevant specialists.
• Review borrowing and personal cash reserves with your adviser.

Taxable profit and cash available are not the same measure. Our home loan service can discuss residential investment lending, and our apartment guide covers additional shared-building considerations. Neither rent nor property value growth is guaranteed.