How do I analyse a rental property's cashflow?

Income line: weekly rent × 52 = annual gross rent. Apply 96-98% occupancy assumption (allows ~2-4 weeks vacancy/year, match to suburb-specific vacancy rate). Result: realistic annual rental income.

Cost stack, annual: (a) interest on the loan (variable rate × outstanding balance, P&I or IO), (b) council rates ($1,500-3,500), (c) water + sewerage charges ($800-1,500), (d) strata levies if applicable ($3,000-12,000), (e) building insurance (~$1,500-2,500), (f) landlord insurance (~$400-700), (g) property management (~7-9% of rent), (h) maintenance reserve (1-2% of property value/year), (i) vacancy reserve already in income line, (j) land tax if above state threshold.

Cashflow output: rent − costs = net pre-tax cashflow. If positive, taxed at marginal rate. If negative, the loss offsets other income (negative gearing s8-1). Apply your marginal rate (32.5/37/45% + 2% Medicare). Result: post-tax cashflow.

Year-1 example: $700K IP at 6.4%, 80% LVR ($560K loan, IO). Rent $32K. Interest $35.8K. Other costs $8K. Pre-tax cashflow = $32K − $35.8K − $8K = -$11.8K. At 37% marginal: $11.8K × 37% = $4.4K tax saving. Post-tax cashflow = -$11.8K + $4.4K = -$7.4K (i.e. $7,400/year out of pocket). Plus depreciation ~$10K Div 43 at 37% = $3.7K extra tax saving. Net post-depreciation: -$3.7K (i.e. $3,700/year out of pocket, manageable).