Property investment calculator

Running the numbers on a potential investment is crucial for any property investor. Successful investors know that investing in property is less about the house and more about the investment (the numbers).

The property investment calculator, shown above, gives you the 7 key numbers you need to know when analysing a potential investment, forecast over 10 years.

It's essential to recognise before we get started, that the numbers shown in this property investment calculator are averages only. The figures shown will not be the same every single week that you hold the property. You will need to weather the ups and downs over the market. However, knowing these averages may give you the confidence to hold over time.

The inputs for the property investment calculator

We'll work through each of the inputs for the property investment calculator, showing you what they all mean.

Value of the property

This is what the property is worth. As shown below in the assumptions, we use this to calculate the mortgage on the property.

Cash deposit

This is if you have any cash that you will use as the deposit for the property. If you use $0, then we will assume that you will secure the property with 100% lending. This will likely mean you are using another property (or properties) to secure the deposit. To calculate whether you have enough equity to invest in property without a cash deposit, use our equity calculator.

Capital growth rate

This is how quickly you expect the property to increase in value each year. The average for New Zealand properties over the last 20 years is 6.36% (REINZ, Aug 1999 - Aug 2019). We use a more conservative default figure of 5% in this property investment calculator. Use our capital growth calculator to see what a property might be worth over time.

Condition of the property

The condition of the property impacts the level of maintenance required on the property each year. We estimate this as $500 per year for a brand-new property, $1000 per year for a 'New-Ish' property (less than 20 years old), and $2000 per year for an 'Older' property (20 years+ old)

Rent per week

This is what the tenant pays you each week. The property investment calculator forecasts that it will increase at a rate of 2% per year, which is our assumed inflation rate.

The outputs for the property investment calculator

We'll work through each of the outputs for the calculator, showing you what they all mean.

Equity in the property in 10 years

This is the amount of equity that is forecast to be within the property in 10 years.

Average rent per week

This is the amount of rent paid by the tenant per week, adjusted per inflation.

Average expenses per week

This is the total expenses that you need to pay per week, adjusted for inflation.

Net cashflow per week

This is the difference between your rent per week and the total estimated expenses of your investment property.

Cashflow position

This is whether your property:

• earns you money each week (cashflow positive),
• requires a top-up from you each week (cashflow negative),
• or exactly covers its way (cashflow neutral).

No position is inherently good or bad; it is just essential to understand how the property is expected to function.

It should also be noted that a property may start as cashflow negative and turn into a cashflow positive property. This is because over time, the rent of a property will go up, but the most significant expense (the mortgage) will remain stable for as long as interest rates remain constant. This change over time is not shown in this property investment calculator as it shows averages only.

Equity gain per week

This is the amount that your property will go up each week over a 10-year average.

Net gain per week

This is the combination of the equity gain received each week, plus the cash flow position each week.

Assumptions from the calculator

To make the property investment calculator simple to use, we have included some assumptions about the investment and the economy. In particular, we have assumed:

• That the purchase price of the property is the same as the value of the property. This may not always be the case. For instance, if you can purchase a property for less than its registered valuation.
• That the mortgage used to secure the property will be interest only, rather than principal and interest. This will decrease the mortgage repayment and improve the cash flow position of the property.
• That the interest rate on the property is 4%
• That there will be $3,500 of set-up costs. This would be spread across legal expenses, a valuation and a chattel valuation
• That rates will be 0.48% of the property's value in the first year (increasing at the rate of inflation), and that insurance will cost 0.3% of the property's value in the first year
• That a property manager will be used and will cost 7% +GST of the rent
• That you will use a property investment accountant, who will charge $750+GST in the first year
• That the property will have 3 weeks vacancy per year, which means that you will only receive rent for 49 weeks in the year. This is a conservative assumption. The effect of this is that you will see a more negative picture in the figures than may actually be the case
• Inflation is at 2% per year, which means that the rent and non-mortgage expenses will increase at 2% per year
• If you would like to calculate what your repayments would be with a principal and interest loan, use our mortgage calculator

You may also want to see whether the property will earn you money each week, or require an additional investment to keep going. Use our rental yield calculator to run these numbers. 

If you want to run the numbers using another method, Opes has a full range of other calculators that you can find and use.