How to Analyse a Rental Deal in 15 Minutes

An Australian rental deal has a few wrinkles a US-style worksheet doesn't: rent is usually quoted weekly, purchase costs are dominated by stamp duty rather than US-style closing costs, and gross yields in most capital cities sit well under typical mortgage rates — meaning many investors are consciously negatively geared rather than chasing cash flow alone.

This guide walks through the same worksheet used in the rental cash flow calculator.

01Start with price and financing

Lock in four numbers before anything else:

• Purchase price
• Deposit percentage — commonly 20% to avoid lenders mortgage insurance (LMI), though many investors borrow at higher LVRs and pay LMI to preserve capital
• Interest rate — get an actual quote or a realistic current estimate, not a rate from a headline
• Loan term — typically 30 years

From those, the loan amount and monthly principal & interest payment fall out of standard amortisation math — not an estimate, exact math for the inputs given.

02Convert weekly rent to a monthly, effective figure

Listings quote rent weekly in Australia. Convert to a monthly figure for the worksheet, then apply a vacancy assumption:

Monthly rent ≈ Weekly rent × 52 ÷ 12
Effective rent = Monthly rent × (1 − vacancy %)

A vacancy assumption of 2–4% is a common starting point in a market with reasonably steady rental demand — treat this as a planning assumption to stress-test, not a promise.

03Add up stamp duty and purchase costs

Stamp duty (transfer duty) is usually the largest single purchase cost after the deposit, and it's calculated differently in every state and territory, often on a sliding scale based on price, and sometimes with concessions for first home buyers or owner-occupiers that don't apply to investment purchases. Because rates and thresholds change and vary by state, don't rely on a rule of thumb here — use your state revenue office's calculator (or your conveyancer's estimate) for the actual figure, then add:

• Conveyancing/legal fees
• Building and pest inspection
• Loan application/valuation fees, if applicable
• Any applicable foreign purchaser surcharge, if relevant to your situation

See stamp duty explained for how the sliding scale generally works.

04List every real operating expense

• Council rates and, for apartments/townhouses, strata or body corporate fees
• Landlord insurance
• Property management fees, commonly charged as a percentage of collected rent if you're not self-managing
• Maintenance reserve for ordinary wear
• Land tax, if applicable — thresholds and rates are state-based and depend on your total landholding, not just this property; check your state revenue office

05Calculate monthly cash flow

Monthly cash flow = Effective rent − P&I − monthly expenses

If this number is negative, the property is negatively geared before tax — expected and common in higher-priced Australian markets. Whether that's an acceptable trade-off depends on your tax position and your expectations for capital growth, not on the cash flow number alone. See negative gearing explained.

06Check cash-on-cash return and rental yield

Cash invested = Deposit + stamp duty + purchase costs
Cash-on-cash return = (Monthly cash flow × 12) ÷ cash invested

Gross rental yield = Annual rent ÷ price
Net rental yield = (Annual rent − annual expenses) ÷ price

Because Australian gross yields commonly run lower than US cap rates for comparable financing costs, the rental cash flow calculator uses lower benchmark marks than the US version of the same tool — see the note on the calculator page for why.

07Grade the deal — and let it floor, not round

This site's calculators check a deal against three benchmarks — cash flow, cash-on-cash return, and rental yield — and grade based on how many it clears: all three is an A, two of three is a B (not rounded up to an A), one is a C, none is a D, and negative cash flow is graded F regardless of the other two, with a note that negative gearing is common and not automatically a bad outcome — just one that needs to be weighed against your full financial picture.

08What this worksheet doesn't cover

This is a cash-flow worksheet, not a full investment thesis. It doesn't account for expected capital growth, your personal tax position, land tax if you hold multiple properties, or the qualitative call on a suburb's trajectory. Use it to sanity-check a deal's cash-flow mechanics — pair it with your own research and, for anything tax or lending specific, a conversation with a licensed accountant, financial adviser, or mortgage broker.