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90 Marine Terrace Fremantle, WA, 6160

Property Investment Insights

I took a call from a prospective client last week who was mad keen to get property number two under his belt.

Me: “so what’s the thinking behind the purchase?”

Him: “umm, you know, rental income, we need more dosh”

Me: “how do you mean?”

Him: “well it will rent out for, like, $500pw”

Me: “Alright mate, let me break it down for you”

Then I explained the following:

The deposit was coming from their existing family home.

When equity is released, a new loan is created.

Then there’s the lending against the new prop.

I call this 100% geared. i.e. there’s no folding stuff being used to fund the purchase.

If the total is something like, say, $520,000, then the calculation goes like this:


$500 x 52 weeks = $26,000

Cost of the funds:

$520,000 x 5.8% = $30,160 (estimated interest %)

Other things to be considered:

Rates, water: $2,500

Maintenance: $1,500

Insurance: $1,600

Management $2,600

Total: $8,200


And there’s a principal repayment too… if not now, at some time in the future.

So: $26,000 – (30,160 + 8,200) = -$12,360 (loss)

Now, because neither governement has the nurries to delete negative gearing, there’ll be a refund due at the end of the year, something like $12,360 x 39% = $4,820, so the loss is… wait for it… -$7,540.

I can’t see the sense in this, can you?

If you need a loss making investment, go to St. Georges terrace and step into any number of offices happy to sell you one, or leave the decision to a 6-year old who can point a sticky finger at something that looks pretty and follow their (free) advice.

The conversation ended with me saying to this bloke – courteously – for him and his missus to ask the boss for a pay rise of $10k each.

Boom… before tax gain of $20,000 with zero risk.

I maintain that your financial security begins and ends with how much you earn each day. A close second, is the duration of time you are earning. Third – freebie – is how frugal you (and your other half) are.

Obeying these rules will create the capital required to access profitable moves, support more lending if required, then weather the inevitable shit-storms that hit the high seas of investing.

If you’ve got the income and capital and need the lending to make the next move happen, I am here to help.

>>Book a complimentary 10-min call with me here.

If you’ve no better thought out plan than just the ‘dream’ of owning a second property, do yourself and your family a favour by getting serious about it BEFORE you add unnecessary risk to your lives. It’s not worth the stress and hassle, believe me.


Brodie Brown

BH Brown Mortgage Brokers