Cashflow Modelling for Geared Property: Real Numbers, Real Risks

Property gearing decisions go wrong when people buy a story, not the numbers. Cashflow modelling for geared property means building a simple, realistic profit and loss for an investment property – including tax – and then stress‑testing it before you sign a contract or refinance. Done properly, it tells you in dollars per month what the property will likely cost or produce in your real life.

This guide gives you a practical, spreadsheet‑ready framework with worked examples you can run this week – whether you’re a first‑time investor, a refinancing home owner, self‑employed, or running a small business on top of it all.

A geared property behaves like a small business: income, expenses, finance costs and tax.

1. What cashflow modelling for geared property actually means

Think of a geared investment property like a small business: income, expenses, finance costs, tax, and risk. Cashflow modelling is simply:

1. Estimating realistic rental income.
2. Listing every ongoing cost (including a sinking fund for future repairs).
3. Adding loan repayments at realistic interest rates.
4. Calculating your taxable profit or loss and likely tax impact.
5. Stress‑testing for rate rises, vacancies and income drops.

If you’re new to gearing, it’s worth first reading Plain-English Gearing Basics Every Australian Property Investor Must Know so you’re clear on negative vs positive gearing and upcoming 2026–27 tax changes.

Key definitions

• Geared property – you’ve borrowed to buy it.
• Negative gearing – rent < interest + expenses, so the property makes a taxable loss you may be able to offset against other income (subject to new rules for properties bought after May 2026).
• Positive gearing – rent > interest + expenses, so the property makes a taxable profit.
• Neutral/near‑neutral – around breakeven before or after tax.

APRA requires lenders to add around a 3% serviceability buffer above actual rates for new loans, so your modelling should do something similar.

2. The 7‑line cashflow model you can build today

You don’t need fancy software. A simple seven‑line model in a spreadsheet will do.

Step 1 – Property and loan assumptions

For each property, set up assumptions:

• Purchase price
• Loan‑to‑value ratio (LVR) and loan amount
• Interest rate (P&I vs interest‑only)
• Rent per week and expected vacancy
• Other operating costs
• Your marginal tax rate

We’ll use this base example:

• Purchase price: $750,000 (Sydney unit)
• LVR: 80% (20% deposit + costs from savings/equity)
• Loan: $600,000
• Rate (P&I, 30 years): 6.0% p.a. (indicative only)
• Weekly rent: $750
• Vacancy: 2 weeks per year
• Other annual costs: $12,000 (see breakdown below)
• Marginal tax rate: 37% + Medicare (assume 37% for simplicity)

Step 2 – Fill in the seven lines

1. Gross rent (per year)
$750 × 50 weeks (allowing 2 weeks vacancy) = $37,500

2. Non‑finance property expenses (per year)
Rough working example:

• Council + water: $2,800
• Strata: $4,500
• Landlord insurance: $1,000
• Property management (7.7% of rent): ~$2,900
• Repairs/maintenance allowance: $1,800

Total: $13,000

(You can tighten this with real quotes.)

3. Net rent before interest
= Gross rent − Non‑finance expenses
= $37,500 − $13,000 = $24,500

4. Interest expense
For a $600,000 loan at 6.0% interest‑only:
$600,000 × 6.0% = $36,000 per year

If you’re on P&I, the repayment includes principal, but only the interest is deductible. For cashflow, you care about the total repayment; for tax, you care about interest only.

30‑year P&I at 6.0% is roughly $3,600 per month, or $43,200 per year. At the start, about $36,000 of that is interest and $7,200 is principal.

5. Taxable result
Taxable profit/loss = Net rent before interest − Interest

• $24,500 − $36,000 = −$11,500 taxable loss (negative gearing)

6. Estimated tax impact
At a 37% marginal tax rate:
Tax saving ≈ $11,500 × 37% ≈ $4,255

7. After‑tax cashflow (P&I)
Cash cost before tax (P&I) = Non‑finance expenses + P&I repayments − Gross rent

• Expenses + repayments = $13,000 + $43,200 = $56,200
• Net before tax = $56,200 − $37,500 = −$18,700 (out of pocket)
• After‑tax cost ≈ −$18,700 + $4,255 = −$14,445 per year

That’s around $1,200 per month after tax leaving your pocket.

Under older rules, this loss might have been fully offsettable. Under 2026–27 reforms, new established properties may have losses quarantined, so the tax saving may be lower or deferred. Don’t build a strategy that only works with full negative gearing benefits.