Investment Property Cashflow Analysis

Last updated: July 2026 · Reviewed by John Pierre Saliba, Director and Mortgage Broker, MFAA Accredited

Investment Property Cashflow Analysis, How to Do It Properly

A property investment's cashflow tells you what it actually costs you to hold each week, after accounting for rent received, loan interest, running costs, management fees, depreciation and tax benefits. Many investors buy based on gross yield alone and are surprised by the actual weekly cost. This guide shows you how to do a complete cashflow analysis for a Sydney investment property.

John's lending insight: Cashflow Analysis

I use our Investment Property Analyser with every investor client. The difference between gross yield (what agents advertise) and net weekly cashflow after all costs and tax is almost always significant, sometimes $200–$400/week different. Buying on gross yield without running the full numbers is one of the most common investor mistakes I see.

Step 1, Gross Yield

Gross yield = (Annual rent / Purchase price) × 100. Example: $700/week rent on a $900,000 property = ($36,400 / $900,000) × 100 = 4.04%. This is the starting point, but tells you very little about actual cashflow.

Step 2, Net Yield

Net yield accounts for running costs. Typical deductions from gross yield:

Property management: 7–9% of rent (~0.3–0.4% off yield)
Council rates: $1,500–$3,000/year (~0.2–0.3% off yield)
Water rates: $800–$1,200/year
Landlord insurance: $1,200–$2,000/year
Maintenance/repairs: 0.5–1% of property value per year (budgeted)
Strata levies (units): $2,000–$8,000+/year depending on building

Net yield on a 4.0% gross yield property in Sydney: typically 2.5–3.2% after all running costs.

Step 3, Loan Costs

Interest on the investment loan is the largest single cost. Example: $720,000 IO loan at 6.59% = $47,448/year in interest ($912/week).

Step 4, Cashflow Before Tax

Annual rent ($36,400) − interest ($47,448) − running costs ($8,500) = -$19,548 per year (-$376/week) before tax. This is the negative gearing loss.

Step 5, Tax Benefit

The negative gearing loss ($19,548) plus depreciation ($8,500 from QS schedule) = total tax deduction of $28,048. At 37% marginal rate: tax benefit = $10,378/year ($199/week).

Step 6, Net Weekly Cashflow After Tax

-$19,548 + $10,378 tax benefit = -$9,170/year = -$176/week actual out-of-pocket cost. This is what the investor actually pays each week to hold this property.

Worked Example: $900,000 Sydney Unit, Full Cashflow

Purchase price: $900,000 | Deposit (20%): $180,000 | Loan: $720,000 IO at 6.59%
Weekly rent: $700 ($36,400/year)
Annual interest: $47,448
Running costs: $8,200 (mgmt, rates, insurance, strata)
Depreciation (QS schedule): $7,800
Total deductible expenses: $63,448
Net rental loss before tax: $27,048
Tax benefit (37%): $10,008/year
Net weekly cashflow after tax: -$328/week
Weekly capital growth (at 5% annual): +$865/week
Total weekly wealth creation: +$537/week

John Pierre Saliba

Mortgage Broker & Director

MFAA Accredited · ACL 511092
Bachelor of Business & Commerce
Diploma in Mortgage Broking
Adv. Diploma Financial Planning
10+ years · 80 × 5-star reviews

📅 Book Free Consult 📞 02 8046 3933

Popular Guides

🏦 Broker vs Bank 🔑 First Home Buyer Guide 🛡️ LMI Explained 💰 How Much Can I Borrow? 📊 Fixed vs Variable 🧮 All Calculators

FAQs

Common Questions

What is a good rental yield for Sydney investment property in 2026?

Sydney's gross yields typically range from 3.5–5.5% depending on suburb and property type. Houses in inner Sydney: 2.5–3.5%. Units in inner Sydney: 3–4%. Western Sydney units: 4–5.5%. Gross yield alone doesn't determine investment quality, total return (yield + capital growth) and the weekly cashflow after tax are more meaningful measures.

How does depreciation reduce my cashflow cost?

Depreciation is a non-cash deduction, you don't spend money on it, but it reduces your taxable income. On a new or recently built property, a quantity surveyor's depreciation schedule may identify $7,000–$15,000 in annual deductions. At 37% tax rate, $10,000 in depreciation saves $3,700 in tax, reducing your effective weekly holding cost by $71/week.

Should I buy negatively or positively geared property?

Both have merit, it depends on your income, tax position and investment goals. Negative gearing provides tax benefits (higher income = more benefit) but requires subsidising the property from your wages. Positive gearing generates cash income but less capital growth typically. For most Sydney investors in the accumulation phase, negatively geared properties with strong capital growth potential deliver better total returns.

How do I get a depreciation schedule?

Engage a quantity surveyor (QS) to inspect the property and prepare a tax depreciation schedule. Cost: typically $600–$800 for a standard property. The schedule identifies all depreciable items, building structure (if post-July 1985), plant and equipment, and their annual depreciation rates. The QS fee is itself a tax deduction.

Does vacancy affect my cashflow calculation?

Yes, budget for vacancy. Sydney's vacancy rate is currently ~1.4%, meaning most properties are rarely vacant. But between tenancies, during repairs or in a slower market, you may have 2–4 weeks vacancy per year. Budget 1–2 weeks per year as a conservatism. Management fees also apply only when the property is tenanted, adjust accordingly.

Quick Reference, 2026