your 100,000 at 8.5 less 30% tax gives you about 133,500 after 5 years.....if the interest is capitalised and only tax paid each year buy a prop 350.000 dep 100,000 loan 250,000, rent at 350 pw= income 17500 less interest exp 22500 = 5000 pa loss x 5 years =25000 **** capital growth at only 10% pa = 213,000 profit and mv 563,500 net after 5 years 213000 profit less tax on 50% x 30% rate = 32000......pocket 181,000 after tax so after 5 years your prop is worth 563,000 sell and pay back the loan of 250,000 pocket 313,000 before tax...ie your original 100,000 plus profit 213,000 see the difference cash returns 30,000 after 5 years, prop returns 181,000 same period **************************************************** ***prop in blue chip selected areas only if you pick the wrong area you might get nil returns for 5 years
or use figures capital growth only 5% for next 2 years, then 20% next 3 years = profit 314.000 mv 665,000 tax on capital gain of 50% profit at 30% = 47000. pocket 267,000 profit after tax
really there is no comparison to holding cash........cash cannot grow with inflation like property summary hold cash after 5 years you have made 33,500 profit or property after tax of 181,000 or property after tax of 267,000
rental loss of 5000 pa. less tax deduction at 30% = 1500... ie a tax refund....net cash 3500 pa or about 300 pm cost to make this profit
