Property cash flow is the difference between your rental income and all ownership costs, including mortgage repayments, council rates, insurance, property management fees, and maintenance. A property is positively geared when rental income exceeds costs, and negatively geared when costs exceed income.
When your investment property runs at a loss (negative gearing), you can deduct that loss from your taxable income. If your property loses $10,000 per year and your marginal tax rate is 30%, you get a $3,000 tax refund. This reduces your actual out-of-pocket cost to $7,000. Read more in our guide to negative gearing.
Interest-only loans give you lower weekly repayments and higher tax deductions because the full repayment is deductible interest. Principal and interest loans cost more per week but build equity faster. Most investors start with interest-only for cash flow, then switch to P&I later. Our IO vs P&I comparison breaks this down in detail.
Gross rental yields typically range from 3% to 7% across Australia. Capital city houses average 3-4%, while regional areas and apartments can reach 5-7%. A higher yield improves cash flow, but you also need to consider capital growth potential. The best investments balance both.
Depreciation depends on the property's age and construction cost. New properties can generate $8,000-$15,000 per year in depreciation claims. Properties built after 1985 can claim the building itself (Division 43) at 2.5% per year. Plant and equipment (Division 40) covers items like carpets, blinds, and appliances. You need a quantity surveyor's depreciation schedule to claim. Learn more in our depreciation schedules guide.
Cash flow is the number that tells you whether you can afford to hold an investment property. Not the rent, not the loan repayment in isolation, but the weekly out-of-pocket cost after rent, expenses, and tax. Get this number wrong and you end up forced-selling a property in year three because the holding cost crept up.
This calculator runs the full picture: gross rent, less interest, rates, insurance, property management, maintenance allowance, and depreciation. Then it applies your marginal tax rate to the loss (or gain) to give the after-tax weekly cost.
Annual rent minus annual expenses minus depreciation gives you the pre-tax position. If it's negative, the loss reduces your taxable income, which generates a tax refund at your marginal rate. The after-tax cost is the pre-tax loss minus the tax refund. Divide by 52 for weekly. The full formula is Annual Rent - Interest - Rates - Insurance - Property Management - Maintenance - Depreciation = Pre-Tax Position. Then Pre-Tax Position - (Pre-Tax Loss × Marginal Tax Rate) = After-Tax Position.
Three things. First, vacancy. Most assume 100 percent occupancy. Realistic vacancy is 2 to 4 weeks per year, which costs $1,200 to $2,400 on a $600 per week rental. Second, depreciation. Spreadsheet versions skip it entirely. A quantity surveyor's depreciation schedule on a recently renovated property can add $5,000 to $15,000 of non-cash deductions. Third, interest rate stress. Today's rate is not tomorrow's rate. Stress-test the cash flow at 1 to 2 percent above current to see what happens if rates move.
Negative cash flow means the property costs you money to hold week to week, with the trade-off being capital growth and tax benefits. Positive cash flow means the rent and tax refund cover the holding costs, with the trade-off usually being lower growth potential. Neither is automatically better. The right answer depends on your income, your risk tolerance, and what you want from the investment. High-income earners often prefer slight negative cash flow paired with strong growth markets. Lower-income earners or retirees usually want positive cash flow.
Cash flow is one piece of the puzzle. Run the rental yield calculator first to filter on which properties stack up. Use this cash flow calculator to validate the weekly position. Then layer in the negative gearing calculator for the tax detail and the growth projection calculator for the long-term picture. Together they tell you whether the property pays off across 10 to 20 years.
For the full set of investment property tools see our calculator hub. To talk through a specific property, book a free strategy call.