Real Numbers: $750k Investment Unit at 80% LVR Over 10 Years

You’re looking at a $750,000 investment unit and wondering: what does this actually mean for my cashflow, tax and equity over 10 years?

In this worked example, we model a $750k unit bought at 80% LVR, using realistic Australian assumptions for rent, expenses, loan structure and tax. You’ll see, in hard numbers, how much cash you might need to tip in each year, how negative gearing works in practice, and what sort of equity you could build over a decade.

We’ll stick to clear, rounded numbers and flag what’s indicative only. The point isn’t to predict the future; it’s to give you a decision‑grade template you can adapt to your own situation this week.

1. The scenario: your $750k investment unit, defined

To keep this example usable for most readers, we’ll define one core scenario and then stress‑test it.

1.1 Property and loan assumptions

Property:

• Purchase price: $750,000
• Type: established 2‑bedroom unit in a major city
• Strategy: long‑term hold, geared, personally owned (not SMSF)

Loan setup (80% LVR):

• LVR: 80% (so no LMI in most cases)
• Loan amount: 80% × $750,000 = $600,000
• Deposit + costs from savings/equity: $150,000 + purchase costs
• Loan type: investment P&I, 30‑year term
• Interest rate: 6.0% p.a. variable (illustrative, not a quote)

Core repayment:

• $600,000 over 30 years at 6.0% P&I ≈ $3,598/month
• That’s about $43,200/year in repayments (principal + interest)

Note: APRA expects lenders to test serviceability with a 3% buffer above your actual rate. On a 6% actual rate, your borrowing power is tested around 9%.

1.2 Income and expense assumptions

Rental income (Year 1):

• Weekly rent: $750/week (3.9% gross yield on $750k)
• Annual rent: 52 × $750 = $39,000

Assume:

• Average 2 weeks’ vacancy per year
• Actual collected rent ≈ 50 weeks × $750 = $37,500
• We’ll use $37,500 as Year‑1 rent

Non‑finance expenses (Year 1):

• Council rates: $2,000
• Water rates: $800
• Strata levies (including sinking fund): $4,000
• Landlord insurance: $600
• Property management: 7% + GST of rent ≈ $2,900 (rounded)
• Repairs/maintenance allowance: $1,500

Total non‑finance expenses: $11,800

Finance expenses (Year 1):

• Interest component in Year 1 is around $35,700 (out of $43,200 P&I) – we’ll refine later
• Principal repaid in Year 1 ≈ $7,500

We’ll assume:

• Capital growth: 3% p.a. (base case)
• Rent growth: 3% p.a. (base case)
• Inflation on expenses: 3% p.a.

1.3 Your personal tax setting (for the example)

Every household is different, but to model negative gearing we need a tax rate. Let’s assume:

• Investor is an individual on $150,000 taxable income from salary or business
• Approx marginal tax rate 39% (including Medicare) – rounded

You can adjust the marginal rate to your own situation later.

2. Year‑1 snapshot: cashflow, tax, and equity

We’ll start with Year 1. This is usually the most painful year because rent starts lower than your mortgage repayments and costs.

2.1 Year‑1 pre‑tax cashflow

Step 1 – Income and deductible costs

• Rent received: $37,500
• Deductible non‑finance expenses: $11,800
• Deductible interest (approx): $35,700

Tax position:

• Rental income: $37,500
• Less deductible expenses: $11,800 + $35,700 = $47,500
• Tax loss = $10,000 (negative gearing, before any 2026+ reform changes)

Step 2 – Actual cash in and out

Cash IN:

• Rent received: $37,500

Cash OUT:

• Total loan repayments (P&I): $43,200
• Non‑finance expenses actually paid: $11,800

Total cash out: $43,200 + $11,800 = $55,000

Pre‑tax cashflow:

• Net cash = $37,500 – $55,000 = –$17,500 (your pocket funds the gap)

2.2 Year‑1 tax impact: negative gearing

From above, your taxable rental loss is $10,000.

At a 39% marginal rate, estimated tax saving:

• $10,000 × 39% = $3,900 less tax payable

So your after‑tax cashflow becomes:

• Pre‑tax cashflow: –$17,500
• Plus tax benefit: +$3,900
• After‑tax cashflow: –$13,600 (approx)

That’s roughly $1,130/month you need to tip in from salary/biz income in Year 1 to keep the property running.

Under the 2026–27 negative gearing reforms, losses on many established properties bought after 12 May 2026 are likely to be quarantined, not fully offset against salary. Our separate guide, “Real Numbers: After‑Tax Cashflow on Investment Loans Before and After Reforms”, walks through those mechanics in detail. This example assumes current rules for simplicity.

2.3 Year‑1 equity: deposit + principal + growth

At the end of Year 1, your equity comes from:

1. Deposit and costs you put in
2. Principal you’ve repaid
3. Any capital growth (or loss)

We’ll ignore purchase costs in equity for now and focus on the property vs debt.

• Starting property value: $750,000
• Year‑1 growth at 3% = $22,500 → end value ≈ $772,500
• Loan balance after Year 1 ≈ $600,000 – $7,500 = $592,500

Equity = $772,500 – $592,500 = $180,000

You started with $150k deposit. In one year, on paper:

• Equity increased by $30,000 (approx)
• You also tipped in about $13,600 after tax in cash

So your total “economic gain” (equity gain + tax benefit) vs your own cash contribution is more nuanced – we’ll unpack this over 10 years.

3. 10‑year projection: base‑case cashflow and equity

Now we stretch this out to 10 years under our base assumptions:

• 3% p.a. capital growth
• 3% p.a. rent growth
• 3% p.a. expense inflation
• 6% interest rate for simplicity (in reality it will move up and down)

This is not a forecast. It’s a structured way to see the moving parts.

3.1 Property value and loan balance over 10 years

Property value with 3% annual growth:

(A more exact 3% compounding gives about $1.01m at Year 10; we’ll round to $1.007m to keep the numbers neat.)

Loan balance (30‑year P&I, 6%):

On a 30‑year 6% P&I schedule:

So over 10 years you’ve repaid about $75,000 of principal.

Equity at Year 10 (base case):

• Value ≈ $1,007,000
• Loan ≈ $525,000
• Equity ≈ $482,000

That’s an increase of roughly $332,000 over your starting $150k equity, before selling costs or CGT.

3.2 Rent, expenses and repayments over 10 years

Next, let’s look at rent, expenses and repayments in Years 1, 5 and 10.

Rent with 3% growth:

Non‑finance expenses (3% inflation):

Year‑1 non‑finance expenses: $11,800.

Loan repayments:

• P&I is fixed by the amortisation schedule, so repayments stay about $43,200/year (not counting rate changes)

3.3 Pre‑tax cashflow at Years 1, 5 and 10

Let’s zoom in on three points in time using simplified interest/principal splits.

Year 1 (recap)

• Rent: $37,500
• Non‑finance expenses: $11,800
• Interest (approx): $35,700
• Principal: $7,500

Pre‑tax cashflow:

• Cash in: $37,500
• Cash out (repayments + expenses): $43,200 + $11,800 = $55,000
• Net cashflow = –$17,500

Year 5

By Year 5:

• Rent: ≈ $42,250
• Non‑finance expenses: ≈ $13,300
• Total P&I still: $43,200/year
• Interest portion has dropped slightly; assume ≈ $33,500 interest, $9,700 principal (rounded)

Tax position:

• Rental income: $42,250
• Deductible expenses: $13,300 + $33,500 = $46,800
• Taxable loss ≈ $4,550

At 39% marginal tax:

• Tax benefit: ≈ $1,775

Cash position:

• Cash in: $42,250
• Cash out: $13,300 + $43,200 = $56,500
• Pre‑tax cashflow = –$14,250

After tax:

• –$14,250 + $1,775 ≈ –$12,475 (about –$1,040/month)

Year 10

By Year 10:

• Rent: ≈ $49,000
• Non‑finance expenses: ≈ $15,300
• Total P&I: $43,200
• Interest has dropped further as the loan amortises; assume ≈ $31,000 interest, $12,200 principal

Tax position:

• Rental income: $49,000
• Deductible expenses: $15,300 + $31,000 = $46,300
• Taxable profit ≈ $2,700

At 39% marginal tax:

• Extra tax payable: $1,053

Cash position:

• Cash in: $49,000
• Cash out: $15,300 + $43,200 = $58,500
• Pre‑tax cashflow = –$9,500

After tax:

• –$9,500 – $1,053 ≈ –$10,550 (about –$880/month)

3.4 What this base case is really telling you

Over 10 years, even in a steady growth scenario:

• The property stays cashflow negative in this setup
• The annual after‑tax cash shortfall slowly improves from ~–$13.6k to ~–$10.5k
• You’re gradually paying down principal, building about $75k loan reduction
• Moderate 3% growth builds total equity to around $482k by Year 10

This is the heart of geared property: you’re swapping ongoing cashflow pain for long‑term equity build, with tax softening some of the pain.

For a framework to build your own sheet from scratch, see “Cashflow Modelling for Geared Property: Real Numbers, Real Risks”.

4. Stress‑testing: what if rates rise or growth disappoints?

Base cases are comfortable. Real life isn’t. Before buying, you should test at least a couple of shock scenarios.

4.1 Scenario A – Rates jump, rents stall

Assume:

• Interest rate rises from 6.0% to 8.0% by Year 3
• Rent growth slows from 3% to 1% from Year 3 onwards
• Non‑finance expenses still grow at 3% p.a.

By Year 5 under this stress case:

• Weekly rent ≈ $780 (instead of $845) → annual rent ≈ $39,000 after vacancies
• Non‑finance expenses ≈ $13,300 (as before, 3% inflation)
• P&I at 8% jumps to roughly $53,000/year (illustrative)

Cashflow at Year 5 (stress):

• Cash in: $39,000
• Cash out: $13,300 + $53,000 = $66,300
• Pre‑tax cashflow = –$27,300

Tax side:

• Interest component is now higher; say ~$47,500 interest, $5,500 principal
• Deductible expenses = $13,300 + $47,500 = $60,800
• Taxable loss = $39,000 – $60,800 = –$21,800
• Tax benefit at 39% ≈ $8,500

After‑tax cashflow:

• –$27,300 + $8,500 = –$18,800/year (~–$1,565/month)

Compared to base case Year‑5 –$12,475, your after‑tax cash leakage has jumped over 50%.

This type of test is especially critical for small business owners, where personal and business cashflow are intertwined. As we noted in “Smart investment property strategies for time-poor small business owners”, you should test any new purchase against a 2–3% rate rise and a 30–50% drop in business drawings.

4.2 Scenario B – Low growth or flat prices

Now assume prices crawl or stall:

• Capital growth: 1% p.a. instead of 3%
• Rent and expenses as per base case

After 10 years at 1% growth:

• Property value ≈ $750,000 × 1.01^10 ≈ $829,000
• Loan balance ≈ $525,000 (repayments the same)
• Equity ≈ $304,000

Compare to base case equity of ~$482k. You’ve still built equity (because the loan is amortising), but:

• Total equity gain ≈ $154k (from $150k to $304k)
• You’ve paid ongoing negative cashflow for 10 years for a much smaller payoff

In a low‑growth world, the question becomes: is this equity build worth the cashflow strain and risk?

4.3 Quick comparison: base vs shocks

This table is rough but directionally accurate: rates and rents shift cashflow; growth (or lack of it) shifts equity.

For a full comparison of gearing in property vs other assets, see “Comparing Gearing in Shares vs Property for Australian Investors”.