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PIA User Guide - Somerset Financial Services

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1. Year Property value here called Investment Property to distinguish it from the home Purchase costs Investments Investment loan Gross rent week Interest Rental expenses Depreciation of building Deprecation of fittings Loan costs Tax credit After tax cash flow Of the investment property rows only the nvestment term amp surplus row is new This is described below PIA User Guide Page 88 PIA Version 7 320 Chapter 6 Linked loans spreadsheet After tax cash flow S40 000 8 205 7 480 7 745 7 736 6 113 Inv term amp surplus PPP P 8 205 7 480 7 745 7 736 6 113 Home value 480 000 508 800 539 328 571 688 642 348 859 607 The nvestment term and surplus row shows the term remaining for the investment loan in the input column and any investment surplus in the projection columns Clicking on the Investment term and surplus row title or on any of the projections columns opens the Investment surplus dialog Investment Surplus dialog This dialog shows the derivation of any investment surplus and includes the variables rents tax credits rental expenses interest Years payments principal payments Rents 15 545 19 291 and cash outlays from which it is calculated Tax credits 10 165 9 392 For details of how to set projections see 3 1 Rental expenses 5 046 6 080 The implications for investment surplus of having independent Interest payments 30 346 30 348
2. Living expenses Graphics Pages Who pays Value amp debt F Cash flows Rate of return gt Cash Flow Analysis J Summary page First pear detail M Medium term projections m Long term projections Investment capacity Rental yields Bank comparison Equity amp investment Tas liabilities Cancel The approximate number of pages is given in each case Where reports are less than a full page the report generator paginates intelligently to save paper The customised report options are retained for the next time you wish to use this item Graphics reports You can include graphics in your customised report For details of the graphics see 7 4 Graphics menu gt We suggest you simply try generating various reports on screen You can then print out the ones you want PIA User Guide Page 101 PIA Version 7 320 Chapter 7 Menus and toolbars Clicking Graphics in the menu bar opens the Graphics menu Each item in the menu ia pis generates a printable report with a graphic depicting some aspect of the investment ee analysis The rest of each report shows the data on which the graphic is based Cash Flows Not all graphics are available in all soreadsheets The menu items for graphics that are Rate of Return not currently available are dimmed Rental Yields The thumbnails miniature graphics shown here are only intended to give you an idea of Bank Comparison wh
3. 66 36 60 422 47 92 Total equity 122 531 159 240 197 79 23020A 325 499 Sige PIA User Guide Page 92 PIA Version 7 320 Chapter 6 Linked loans spreadsheet Total LVR 81 29 Your total net cost per year Term remaining 17 7yr 43 770 43 046 43 311 43 301 41 679 The value in the input column of the Term remaining row shows the term remaining for the home loan This is the key value to watch when trying what if scenarios with PIA as reducing the term of the home loan is a key aim Clicking on the Term remaining row title or Input column displays the Loan Balance dialog see 5 8 This allows you to see how the loan balance for each year You can also scroll through to see where it becomes zero Credit Line Link Home amp Investment Loans w Capitalise Interest Capitalise Expenses As indicated at the beginning of the chapter you can test a range of scenarios using the Independent and Linked loans spreadsheets by submitting each to the options capitalise interest and capitalise expenses Capitalise Interest and Capitalise Expenses are menu items in the Settings menu When switched ON a tick 4 appears next to the item in the Settings menu Capital Gains Tax Stamp Duties Sales Commission Tax Scales Selling Costs Set Country Defaults Save Default Template When capitalization is selected any investment surplus is added to the home loan repayments and the term of the home lo
4. A426 Personal loan payments Credit card payments PIA Version 7 320 7 6 Calculator menu Clicking Calculator in the menu bar opens the Calculator menu Chapter 7 Menus and toolbars All purpose Calculator The Calculator menu offers a range of options for calculating the projected value of Capital Growth items that can then be entered into the spreadsheets and incorporated into reports The calculators function semi independently of the spreadsheets in that they may take default values from the spreadsheets e g property price but they do not return changes in those variables to the spreadsheets When you make a change to any of the variables in a calculator press the Enter key to recalculate the answer s All purpose Calculator Clicking All purpose Calculator opens the Calculator As Inflation Income Tax Stamp Duby Sales Commission Capital Gains Tax Land Tax Borrowing Capacity Loan Payments Loan Eligibility Loan Refinance Retirement Goals Superannuation part of the Windows operating system this calculator is only available in f Calculator Windows Capital Growth Calculator Clicking Capital Growth opens the Capital Growth Calculator This enables you to calculate the average annual rate of growth for a property over a number of years given its value at the beginning and end of the period This feature is useful in working out capital growth
5. Costs dialog as the value is entered elsewhere either in the Property Value dialog see 3 2 the Investment Other costs Analysis spreadsheet or in the Data Entry Check List z see 2 4 Total purchase costs Conveyancing costs Conveyancing costs can vary substantially depending on who you have do the work how much legal work is involved and the cost of the property Some items for which your solicitor charges for example search C Revenue catea FAET E i fees may be better recorded under Loan costs if they MitS eee are conditional on the provision of finance This is because loan costs normally confer tax deductibility sooner than purchase costs The Loan Costs dialog is reviewed in 3 15 Tr Tax Statue M Uses Old amp Capital cost Other costs There is the provision for recording both the type and amount of any other purchase costs Tax status In most cases purchase costs are treated as a capital cost that is for tax purposes they are only considered at the time of sale when calculating any capital gains tax liability However in places like the A C T where the land is long term leasehold they are considered a revenue cost and are deductible in the year of purchase You need to check this with your accountant Stamp duty In Australia stamp duty is tax levied by state governments on real estate transfers By default PIA calculates stamp duty as a function of the purchase price and the selected stamp du
6. Depreciation Preferences Method Diminishing value General c Prine cost C Annual claim k Link value to property price iW Use effective life milest 200 00 Low yalue pool rate halved in year Tyr yr ayr 1200 1 040 901 1 686 2742 1714 1 071 GES 268 3z2 265 1852 1 36 JA Ei x ces value method confers tax benefits sooner and is thus more tax effective than the prime cost method If an annual depreciation schedule has already been prepared independently of the PIA program it may be more convenient to specify the annual total depreciation claims rather than the individual items If this is done the method is specified as Annual claim The depreciation method can be set with the appropriate radio button at the bottom left of the dialog Link value to property price By default when the property price is first specified the total value of fittings is set to equal 6 of this price and individual items are all consolidated into the General fittings category or split 50 50 with the Low value pool If changes are made PIA User Guide Page 39 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet to items the depreciation schedule the Link value to property price check box is de selected Values of fittings then remain unaffected by further changes in the property price Use effective life rules In Australia tax legislation dictates that for items acquired aft
7. Displays the Wealth Builder spreadsheet Independent Loan spreadsheet if you have not linked the loans Displays a summary of the Investment Analysis and Home Loan Analysis spreadsheets Linked loans spreadsheet if you have linked the loans The Link icon The Link icon links or unlinks the investment loan and the home loan E If loans are not linked default it links them ink 7 If you have linked the loans it unlinks them If you click this icon when in another spreadsheet you are taken to the Linked loans spreadsheet and the loans are set to Linked When loans are linked any investment surplus is added to the home loan repayments and the term of the home loan is shortened accordingly The Link icon reflects the current status of the link Independent default Linked li not linked i The spreadsheet title also reflects whether the loans are linked or independent showing Independent loans or Linked loans in the top left hand corner of the spreadsheet Report When loans have been linked you can generate a detailed report outlining the interaction between the investment and home loans by selecting Linked loans from the Report menu see 7 2 PIA User Guide Page 87 PIA Version 7 320 Chapter 6 Linked loans spreadsheet The following rows in the investment property area of the Loans summary spreadsheet are identical to those in the Investment Analysis spreadsheet Please see Chapter 3 for details
8. Fixtures amp fittings Disposal costs Renovation costs Acquisition costs Capital gain Taxable Capital Gain Capital gain 155 521 Building depreciation claims 37 500 white back depreciation claims Capital Gain incl write back 193 021 Discount rate Taxable capital gain 463 691 Capital Gains Tax 2 258 Taxable income 15638 Tas on income D Taxable capital gair ede Aro Mew tax 155 521 Capital gains tax Page 115 PIA Version 7 320 Chapter 7 Menus and toolbars Land Tax Clicking Land Tax opens the Land Tax Calculator Land tax is an annual state imposed tax based on land Land Tax Calculator Queensland ccm e piren ee i Total land value of multiple properties 150 000 state and are subject to Bey Total tax payable Oo change For this reason it is imperative that you consult the re Land value of single property relevant Office of State Si aa Revenue for the latest rules Single tax payable applying to the entity that owns the land You must then ensure that the scales are defined ate More Information according to those rules see l This calculator is a general guide only For more specific Land Tax Scale below information contact the Office of State Revenue In most states the tax is based on the aggregated value of all land owned in that state and the tax for an individual property must be apportioned Other E areas a ne areal accordingly The
9. Loan Interest a 00g Loan Payments 2 964 tmth 35 565 year OF Cancel Annual total a Chapter 5 Wealth Builder spreadsheet payments annual row of the Annual Living Expense Budget dialog Report button Clicking on the Report button closes the dialog and generates a Living expenses report see 7 2 Annual Living Expenses dialog Clicking on any of the values in the projections columns of the Living expenses row opens the Annual living expenses dialog see 4 11 2yr Syl dyr dpr 32 188 33 476 34 815 36 207 Living Expense Projections iY Inflation indexed from year Tyr at a rate of 4 00 PIA User Guide Page 76 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Living expenses 4 00 30 950 32 188 33 476 36 207 44 052 New tax 5 940 6 859 8 807 12 370 22 421 Loan payments 65 914 65 914 65 914 65 914 65 914 The values in the projections columns in the New tax row show the projected total tax payable each year after current taxable income is adjusted to new taxable income as a result of rental deductions see 6 10 Under structured tax scales the harder you work the more you earn the more tax you pay With negatively geared investment property the harder you work the more you earn the more tax you get back This means that tax benefits are maximised if the property is purchased in the name of the highest income earner Such details can be entered in the Tax Benefits dialog New Tax Paym
10. The User Interface 2 4 Data Entry Check List When you select Create a new property file from the Welcome screen and click OK the Data Entry Check List is displayed This dialog is a quick easy and intuitive way for new users to enter all the basic data for a new property file The Data Entry Check List is a useful but not a critical step in analysing a property investment As you will see later all of the variables in the Check List can be entered directly from the main spreadsheet This has the advantage of showing instant feedback but is less intuitive and does not show which variables have yet to be changed Data Entry Check List Property Finance Investor What IF Property Details Property alue 400 000 Purchase Costs 14 425 Rental Income 17 536 Rental Expenses pBz Depreciation of Building F000 Depreciation of Fittings 3 850 Use these values as the new defaults The figure above shows the Data Entry Check List Property page with its original default values The Data Entry Check List is divided into four tabbed pages of variables covering the key components of a property analysis Property Details of the property Finance How the property is financed Investor Personal and tax related details What If Allows you to see what happens over time with different inflation and growth rates You can access a page by clicking on the corresponding tab Using the Data Entry Check List The Quick Start Guide contai
11. Upper Sheet Inactive O Tenant Negatives Defaults PIA User Guide Page 15 PIA Version 7 320 Chapter 2 The User Interface 2 9 Windows and sizing Here is a quick summary of the user interface features of Microsoft Windows that affect PIA The figure below shows a downsized PIA window with various elements J PIA symbol a Filename and application name 7 p ica ae z Title bar all Untitled Somerset PIA Sime File Edit Report graphics Investor Calculator wiew Settings Help John Dough for personal use only i Projections over 10 2yr 3yr Property value 13 500 3AT 60s SAA 30 Furchase costs Investments Loan amount 202 469 262 469 200 469 Equity 26 041 42139 ssal gt The title bar of the Windows window shows the PIA symbol the filename and application name Somerset PIA and the Minimize Maximize and Close symbols Resizing a window Minimize E Click the Minimize symbol to minimize the window to a taskbar button Click the taskbar button to restore the minimized window Maximize a Click the maximize symbol to make the window fill the whole screen Restore E Click on the symbol in the maximized window which replaces the Maximized symbol when window is already maximized to restore the window to the previous size You can manually resize an open window in the normal way Width Point to the left or right window border the pointer chang
12. 25 806 24 996 23 169 17 097 The nterest rates row allows you to specify the annual interest rates applying to the home loan year by year The value in the input column shows the average annual interest rate over the term of the loan If you select and overwrite this value the interest rates for all years are set to the new value The values in the projections columns show the interest rate for the specified years If you select and overwrite any of these values PIA recalculates the average rate but the interest rates in other years are unaffected Interest Rates dialog Clicking on the nterest rates row title opens the Interest Rates dialog As in the spreadsheet cells you may overwrite the average interest rate or the rate for individual years Note however that in this case making a change to any one year results in the same change to all following years You can enter rates for each year up to 40 years See 3 1 for details on how to set projections Average Tyr et Wt dur Fur m s007 2 00 a 00 5 00 5 00 lt gt gt OF Cancel PIA User Guide Page 61 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Interest rates 8 00 8 00 8 00 8 00 8 00 8 00 Interest 26 554 25 806 24 996 23 169 17 097 Loan balance 336 000 326 989 317 230 306 661 282 819 203 588 The Interest row shows the projected total interest component payable each year PIA calculates these values so no entries can be
13. 30 000 95 O00 brackets Allowable Deductions 0 0 0 If Use marginal rate is ae a selected the row title in the Current Taxable Income 65 000 30 000 Investment Analysis spreadsheet is Tax credit and the marginal rate is shown in the input column Taxable Income Projections cell M Auto indesed from year Tyr at a rate of 4 00 income is selected and the If the taxable income is il Advanced 7 Year Tyr lt lt lt gt gt i Cancel title is registered in the known the tax credits can investor s name only the row title changes to Tax credit single and the input cell shows the investor s taxable income be calculated more precisely If Use taxable If the property is registered in joint names the row title becomes Tax credit joint and the taxable incomes of both partners are used to calculate the tax credits and the total is shown in the input column cell Ownership Proportional ownership can be specified for a property purchased in joint names Using taxable income in single or joint names takes account of tax credits accruing in different tax brackets thus providing a more precise assessment of the tax credits However it requires knowledge of the current and future taxable income and assumes that tax brackets do not change As a result of bracket creep it may In some cases be more accurate to use the marginal tax method for longer term projections 10 years PIA Us
14. 4 of the monthly payment etc The term of an Interest Only loan is by definition indefinite Loan Eligibility Calculator Loan Payments Calculator Loan Type f Principal amp interest Interest only Loan amount Interest rate Payments per year 1 Term of loan 25 00yr Periodic payment 1 136 Chapter 7 Menus and toolbars Paid f Monthly Fortnightly Weekly Yearly Calculate Term Payment Clicking Loan Eligibility opens the Loan Eligibility Calculator This calculator provides a means of working out whether or not you qualify for an investment loan under the criteria set down by a financial institution The calculator is divided into three areas You can enter details of investor and partner income eligible income rental income and other income You can enter details of monthly and annual repayments of Loan A and Loan B see 3 10 credit cards and other expenses in the Outgoings area The Debt Service Ratio is then reflected in the Loan Eligibility area of the calculator It is general practice for the financier to consider a specified percentage of the investor s income e g 30 of salary plus 80 of rent as eligible income and then compare it with the total loan payment commitment If the total outgoings are to exceed the eligible incomings i e the ratio of outgoings to incomings is greater than 100 there is little likelihood of receiving the proposed loan Loan Eligibilit
15. 438 Furniture package T 0 Dialogs with earlier version of Windows Loan costs 0 3 758 3 758 Additional loan T Totals 0 184 196 194 195 Loan T ppe PIA User Guide Page 4 PIA Version 7 320 Chapter 2 User Interface This chapter describes the user interface of PIA The chapter covers the following information Congratulations screen Welcome screen Specify Country Defaults dialog Data Entry Check List Elements of the PIA window Elements of the PIA spreadsheets Dialogs Preferences Windows and sizing PIA User Guide Page 5 PIA Version 7 320 Chapter 2 The User Interface 2 1 Congratulations screen The first time you ever use PIA on a particular computer you will be prompted to enter your registration number see your receipt or the back of your CD case A registration number is not requested if you are upgrading on the same computer Resistration Number Licensee I ohn Dough for personal use only Registration number a When you enter the correct number the confirmation message Welcome to the World of Property Investment Analysis is displayed Congratulations Welcome to the World of Properly Invesiment Analysis For further details of getting started with the software please see the PIA Quick Start Guide PIA User Guide Page 6 PIA Version 7 320 Chapter 2 The User Interface When the PIA Welcome screen appears you have the choice of opening the l
16. 5 000 3 850 986 45 806 6 811 9 323 5 000 5 043 986 47 224 9 032 8613 65 000 40 000 14 56 Your cost income per week 21 25 179 166 168 164 13 Property Details 400 000 17 836 12 215 210 341 3yr 476 406 379 356 97 051 6 00 4 00 19 291 30 348 6 080 17 137 5 000 3 467 986 45 902 8 383 6754 Total cost Gross yield Net yield Cash positive by Syr y 10yr 535 290 716 339 379 356 155 935 6 00 4 00 20 666 379 356 336 983 6 00 4 00 25 386 30 346 6 576 30 348 6 001 12 963 43 876 O76 5 887 7510 8549 419 356 4 46 3 05 22yr Chapter 2 The User Interface Projections title Projections column headers Projections columns The bottom line The figure above shows the PIA interface with the Investment Analysis spreadsheet open This is the default spreadsheet and the one in which you will spend most time This spreadsheet shows the real power of the PIA software You can make changes to variables in the spreadsheet and immediately see the projected impact over a period of up to 40 years What can you change PIA uses different colours to indicate which variables you can change and how you can change them Blue values are editable You can click on them and overwrite them directly Double clicking on them opens the accompanying dialog Black or red values are calculated values Clicking on these opens a
17. 539 328 605 989 810 950 Home loan balance 17 7yr 336 000 326 989 317 230 295 215 222 057 The Home value row shows the projected value of the investor s home The value in the input column reflects the average capital growth rate over the years shown in the Projection columns Changing this average rate by selecting and over writing it will result in the growth rates for each year being set to this same rate The individual annual home values and or growth rates may be altered in the Home Value Growth dialog see below The future home values shown in the projections columns of the spreadsheet are calculated using these annual capital growth rates Home Value Growth dialog Clicking on the Home value row title or double clicking on the number in the input column displays the Home Value Growth dialog This facility allows you specify the individual annual capital growth rates or the actual home valuations When one is changed PIA calculates the others The value of your home is used in calculating the Joan value ratio Property value This row shows the projected property values for up to 40 years These are based on the growth rates shown in the next column Property value MEn 508 800 539 328 571 668 605 989 642 348 Growth rates The value in the input column in the spreadsheet Growth rates 6 004 6 002 6 002 6 002 6 002 6 002 reflects the current capital growth rate upon which the l future value
18. 8 209 6 984 Equity 180 422 Fre tax IAR Cede After tas IRR 14 43 Marginal tax rate 45 50 Pre tax equivalent of IAF 25 53 PIA User Guide Page 47 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Rate of return IRR 15 27 Your cost income per week Pre tax equivalent 23 13 158 144 149 149 118 This is literally the bottom line the reason for all the entries and calculations in the spreadsheet It shows the projected weekly net cost or income resulting from the investment The default title is Your cost income per week Cost is shown without brackets income in brackets If you prefer to reverse the convention see 7 7 you can set the title to Your income cost per week with income shown without brackets and costs shown in brackets PIA User Guide Page 48 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Address Property cost 400 Total cost Gross rent yr 1 Gross yield Net rent yr 1 Net yield Cash neutral investment positive by The Property Details area at the bottom of the Investment Analysis spreadsheet key figures for the property Cash neutral investment is the initial deposit required to make the after tax cash flow in the first year equal to zero If the investment is already cash positive when there is no deposit this variable is shown as 0 Cash positive by is the year in which the after tax cash flow is positive for the first time The Gross yield i
19. 806 investor Investor Partner Total i Properties Property Ownership f Single name C Joint names M Tax Options Number of properties New taxable income af O30 Quarantine losses You may vary the number of properties Present tax 13 622 NAAS for which you wish to calculate potential tax peui Ta i Personal use 0 00 benefits by changing Tax credits 9 929 the values in the Properties number area gt Changing the number of properties in the dialog does not E E i feed back to the spreadsheet It is simply a means of checking the total tax benefits of multiple ae Taxable income and tax credits New taxable income equals present taxable income minus rental deductions When you enter the present taxable income of both investor and partner the dialog may then be used to compare the level of tax savings tax credits that may result from the different numbers of investment properties Tax Options Quarantine losses Choosing Quarantine losses results in all tax losses being carried forward and offset against future profits They will not be claimed against other income eg salary in the same year they occur Tax Options NRAS Choosing NRAS results in tax credit subsidies and discounted rental income for a number of years as specified in the NRAS Options dialog Settings menu Report button Clicking on the Report button closes the dialog and generates a Tax
20. Loan Value Ratios Ratios graphics report with a graph and table of the projected loan value ratio for combined home and investment properties over a 25 year period Banks use the loan value ratio as a measure of security when the financing the investment the lower the better For an LVR above 80 mortgage insurance m ay be required while an LVR above 100 will generally rule out any chance of finance The LVR is measured over all loans and properties under the one mortgage Thus equity in one property e g your home can be leveraged to finance new property investments 0 2 4 6 8 10 12 14 6 18 20 Year from purchase Home amp Investment Equity Clicking Home and Investment Equity generates and displays the Home and Investment Equity graphics report with a graph of projected equity over time under two scenarios 1 The red bars show the projected increase in equity in the home under the current repayment scheme 2 The blue bars show the projected increase in total equity when an investment property is included A summary table shows the current and proposed scenario for home and investment properties showing loan payments and equity build up over 25 years This command is only available from the Linked Loans spreadsheet and only when loans have been linked see Chapter 6 Wealth Builder Clicking Wealth Builder generates and displays the Wealth Builder graphics report This A E cae a S provides a graph of total value v
21. NRAS Options opens the NRAS Options dialog The dialog provides access to variables that define the subsidies and rental discounts associated with the Australian Governments National Rental Affordability Scheme NRAS See http www fahcsia gov au for details Clicking the NRAS Tax Incentive button opens the NRAS Tax Incentive dialog see below For easy comparison with an equivalent non NRAS property the rental income and expense parameters are set out side by side in two columns The NRAS parameters do not come into effect until the Apply NRAS checkbox has been clicked Clicking the Cash Flow Comparison button will generate a simple first year cash flow analysis report for the same property under NRAS and non NRAS parameters NRAS Tax Incentive dialog Chapter 7 Menus and toolbars _ NRAS Options m First ear HAAS Tas Incentive Rental discount rate Non HAAS hd mj Oo ol Df 2 on a Vacancy rate Rental income Additional purchase costs Recurring rental expenses Agent s commission a Rates One off rental expenses Special expenses 0 Total rental expenses 7st yr pBz FAT L gt rh oo mm mm a i m a CZ co L a o mn Ie J Ai Apply NAAS for 10 years Cash Flow Comparison Cancel il The dialog allows the specification of the first year NRAS tax NRAS Tax Incentive incentive This incentive is assumed
22. OO pate button opens the Home Loan After tax costrnth 1 781 2 108 1 797 Refinance Costs dialog so that the costs of refinancing can also be included See 4 6 FAT 7 Ok Clase Retirement Goals Calculator Clicking Retirement Goals opens the Retirement Goals Calculator When you enter details of your current 3 status with regard to investments and Retirement Goals Calculator liabilities PIA calculates the number of years needed to achieve retirement 7 Current Status goals your target retirement income Investments ao i Age it 7 Ba j eo expressed in today s dollars given ete ae E E N investment rates and after tax rates of Property 300000 205 469 3927 14 return A The Retirement Status area on the Cash Ready Reckoner shows current Shares investment nest egg target retirement income in today s dollars the total nest SUpersnnuations egg required and the years needed to To achieve the goal 7 Totals 300 000 205 469 3 927 The adjustment factor nest egg divided eae by income is used to convert a target Retirement Status retirement income to an equivalent total Current investment nest egg 14 531 asset value that will produce that cet income For investment property the Target retirement neame today s fyr 30 000 factor of 20 assumes an effective net Adjustment factor nest egg income a0 yield of 5 for property whose value is ee wed BOO O00 keeping pace with inflation Nest egg
23. Registration Number dialog PIA must be registered IMZuEUUE IE AI ey if it is to run in normal mode If PIA is not registered it runs in demonstration mode in which many of the key variables are locked The Registration Number dialog appears when you run the software the first time Registration number However this item makes it possible to register a copy of the software you have been running in demonstration mode or to register with a different name and ae z corresponding registration number ance Feedback Clicking Feedback opens the Feedback dialog This facility allows you to email valuable feedback on the software to technical support Please use the Feedback option it helps us tailor PIA to your needs Licensee ohn Dough for personal use only Because of operating system restrictions the Feedback feature is only available in Windows where MAPI support is available Feedback Did you find the program easy to use O Yes O No OK after a while Describe any problems you encountered List the features you particularly like and use List features you would like to see added to the program ea PIA User Guide Page 133 PIA Version 7 320 Chapter 7 Menus and toolbars Support Online Clicking Support Online sends a message to your MAPI compliant email program to generate an email to support somersoft com au with the current document as a file attachment Please specify the nature of
24. User Guide Page 18 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 2 Property value row End of year 2013 1yr 2yr 3yr 5yr 10yr Property value S400 000 424000 449 440 476 406 535 290 716 339 Purchase costs 14 425 The value in the input column of the Property value row on the spreadsheet shows the property value at the time of purchase Normally this is simply the price paid for the property although this does not have to be the case see below If the initial property value shown in the input column is overwritten PIA assumes that the value and the price paid are the same The values in the projection columns show the anticipated increase in the property value over the projection period PIA calculates these using the specified sequence of capital growth rates However the property value in any year can be selected and overwritten in which case the corresponding Capital growth rate parameter is recalculated Property Value dialog Clicking on the Property value row title or double clicking on a cell containing one of the annual values opens the Property Value dialog This allows you to make adjustments for renovations or the additional purchase of a furniture package It also allows you to enter a different market value if is the not the same as the purchase price of the property book value The initial year is indicated in an editable field example 2005 As all cash flow projections are collated in notional years from
25. amp Investment 2 cnr a at es Clicking Equity amp Investment generates and displays the Equity amp Investment graphics report with a graph of investment property equity versus cumulative monies invested over 25 years The cumulative monies invested is an accumulation of the negative and or positive after tax cash flows for the investment no time factor is taken into account This is compared with the equity built up in the property as a result of those cash flows A summary table shows projected total investment and equity over 25 years detailing after tax cash flow cumulative investment property value amount owing and equity Year from purchase Tax Liabilities Clicking Tax Liabilities generates and displays the Cumulative Tax Liabilities graphics report with a graph of cumulative tax liabilities over 25 years A summary table shows projected tax liabilities over 25 years detailing taxable income in single or joint name as selected in the Tax Credits dialog see 3 17 current tax liability cumulative tax current tax new tax liability cumulative new tax and cumulative savings 0 5 10 15 20 25 Year from purchase feed Equity HE Cumulative Investment Weekly Averages Clicking Weekly Averages generates and displays the Weekly Averages graphics report with a graph of average weekly projected cash flow and average equity growth over 10 years Cash in Cash out Cash net Property Loan Equity Investment Cash Flow Inve
26. any of the reports Load mage Clear mage OK Cancel PIA User Guide Page 96 PIA Version 7 320 Chapter 7 Menus and toolbars eMail File Clicking Email File sends a message to your default email program to generate an email with the currently active PIA document as an attachment The recipient must have PIA software installed to read the file Email File is only available in the Professional Version of the software and because it uses Window s MAPI messaging system only on the Window s operating system eMail Report Clicking Email Report sends a message to your default email program to generate an email with the current report as an attachment Naturally you must first generate a report within PIA before it can be emailed This item is available only in the Professional version of the software and because it uses Window s MAPI messaging system only on the Window s operating system The attached report is sent as a GOF file Graphic Object Format and can only be read by a recipient with the PIA Report Reader software You can download PIA Report Reader free from www somersoft com au pia Load Component w v age Clicking Load Component opens the Load Component dialog allowing you Load Component to load component information that o you have previously saved to a Look iri gt PIAPro e et Ea component file see Save Component below into the current document Suncorp FIM To load a component select ff
27. default values all Untitled Somerset PIA Investment Analysis npu Projections over 10 years End of year AOR i 2yT ayr SYT 10yr Property value 400 000 449440 476406 535 290 716 339 Purchase costs Investments Loan amount Torg oF 9 356 oF 356 oF 9 356 of 9 356 Equity 44 544 70 084 97 051 755935 336 983 Capital growth rate 00 6 00 6 00 6 00 6 00 6 00 Inflation rate CPI 00 4 00 400 400 4 00 4 00 Gross rent Wweek 17 836 18 549 19 297 20 866 25 386 Cash deductions interest 1 2 DO 30 348 20 348 30 346 30 346 a0 348 Rental expenses 0 89 5621 5 B46 6 060 6 576 8 001 Pretax cash flow 18 i 17 645 17 137 16 059 12 963 Non cash deductions Deprec of building 505 5 000 5 000 5 000 5 O00 5 000 Deprec of fittings 3 650 5 043 3 467 1 795 526 Loan costs G86 986 O86 S86 Total deductions 45 806 Af 224 45 90 44 706 43 676 Tax credit single o 929 10 166 9 392 6 329 6 650 After tax cash flow 5 205 r 460 7 745 T F356 6 173 Rate of retum IRR i Your cost income per week Pre tax equivalent T3 158 144 149 149 1 18 Property Details Address Description Property cost 400 000 Total cost Gross rent tyr Ty 17 806 Gross yield Net rent vr 12 215 Net yield Cash neutral investment 799 493 Cash positive by The chapter covers each row and the associated dialogs and info boxes from top to bottom For your orientation the row being described is shown with the row above
28. duty and the building cost as a renovation cost Alternatively you can specify the cost of land and building as the property price but calculate the stamp duty for the land only using the Stamp Duty Calculator in the Calculator menu described in 7 5 You can then overwrite the stamp duty calculated see Purchase cost dialog described in 3 3 and sever the link between stamp duty and property value Investment Property Growth End of year Average Vr 2yr DH 5yr ee Property value SD0 0U0 313 500 328 608 S42 sa 373 059 463 63 Growthrates 4502 A asox asof asof 50 PIA User Guide Page 20 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 3 Purchase costs row Property value 400 000 424000 449 440 476 406 535 290 716 339 Purchase costs 14 425 Investments 40 000 The value in the input column on the Purchase costs row shows the total purchase costs This value cannot be overwritten directly because it is made up of several components such as solicitor s fees and Government stamp duties Purchase Costs dialog Clicking on the Purchase costs row title on the value in the input column or on the projection columns opens the Purchase Costs dialog r Purchase Costs Purchase price Purchase Costs Purchase price The purchase price is the amount paid to purchase the Stamp duty property and the amount on which the stamp duty is calculated It is a non editable field in the Purchase Conveyancing costs
29. each cell of the row The values are 40 years blue indicating that they are editable eee 1 Use the toolbar scroll s gt gt gt lt lt lt to select the next next five previous or previous five years Using the Right Arrow key gt when the right most year is selected Peel also scrolls to the next year i Note that PIA always calculates 40 years of projected values irrespective of the year shown in the right hand column These variables determine what is displayed in the spreadsheet columns not what is calculated Notional or actual years You can set PIA to display notional or actual years Preferences Select Preferences from the Settings menu Display File Locations Magnification Colours Currency The Preferences dialog is displayed You Investment Spreadsheet Bottom Line can select Notional years or Actual years by mi clicking on the appropriate radio button Your cost income per week Net present value C Your income cost per week Real rate of retum C Weekly aftertax cash flow Cash on cash retum Monthly aftertax cash flow c Radio buttons for Notional C Rate of retum f sold Annual cash surplus or actual years z Year EEE Undefined Values f Notional years feg Tyr Ar Pn Actual years feg 2004 2005 Skip check list r Wealth Builder Disable row highlighting Show loan tem i PIA
30. five years Loan costs To make changes to the loan costs click Loan costs in the Investments m en eee e 7 dialog This takes you to the Loan year 2006 2007 2008 2010 atts Costs dialog described in 3 15 Capital Improvements After purchase Renovations a D T T T Additional cash outlays may also be made in later years These could be a Investments Payments result of regular principal payments l ae ad hoc lump sum payments for Cash invested E 0 a 0 0 0 0 0 0 Annual Investments example to pay for a renovation or AEN under a linked loans model available Principal payments in the Professional editions from the re direction of ex home loan payments see 3 5 rental income Fent d see 3 9 and tax credits see 3 5 to eee repay the loan Tax credits d Ex home payments 0 Renovations If renovations are to be carried out in later years their cost can be specified in the appropriate cell The amount is added to the loan and to the value of the property and taken into account in calculating building depreciation see 3 13 If all or part of the cost of these renovations is paid in cash it must appear as a cash outlay in the appropriate Investments Payments cell in the bottom half of the Annual Investment dialog Totals Where a Principal amp Interest loan has been chosen the loan amount reduces over time in line with the principal repayments shown in the Investments row of t
31. in retrospect for any given property The calculator takes a default value for the initial year from the Investment Analysis spreadsheet and applies a default of number of years of 4 Once you have made a change to one of the variables press the Enter key to recalculate the average annual growth PIA User Guide Edit view Help ies aa eia Heee ahea e Capital Growth Calculator Initial year 2006 Initial value Final year 2010 Final values 373 099 Humber of pears 4 Increase 60 355 Average annual growth 450 Page 113 PIA Version 7 320 Inflation Calculator Clicking Inflation opens the Inflation Calculator This enables you to calculate the average annual rate of inflation for a cost item such as rates over a number of years given its value at the beginning and end of the period The calculator takes a default value for the initial year from the Investment Analysis spreadsheet and applies a default of number of years of 4 Once you have made a change to one of the variables press the Enter key to recalculate the average annual inflation rate Income Tax Calculator Clicking Income Tax opens the Income Tax Calculator This calculates the income tax liability for a given taxable income using PIA s current tax scale settings The initial value shown is the income entered for the Investor in the Tax Credits dialog see 3 17 Stamp Duty calculator Clicking Stamp Duty opens the St
32. item itself To remove or modify an item select the item before clicking the appropriate button The Expense Item dialog opens allowing you to enter yearly weekly monthly and quarterly expenses Home loan button Clicking on the Home Loan button in the Annual Living Expenses Budget dialog enables you to make alterations to the conditions governing repayment of the home loan that is amount owing interest rate loan payment rate PIA then indicates the remaining term of the loan Any changes are reflected in the Home loan PIA User Guide Annual Living Expense Budget a Home Insurance Household maintenance 1 500 20 05 125 00 375 Remove Fuel amp power 1 500 20 85 125 00 aro Transport CarB oat rogi 144 25 625 00 1 875 Food amp Drink 7500 144 29 625 00 1 875 Modity Clothing amp footwear 3 000 5769 250 00 fs Telephone FOO 9 62 41 67 125 Superannuation 0 0 00 0 00 U Medical amp Dental FOO 9 62 41 67 125 Personal Insurance 0 0 00 0 00 0 Houshold furniture Holidays amp Travel Sport E ntertainmernt 1 800 34 62 150 00 450 School Fees Education T 0 00 0 00 0 Other 30 950 Home loan payments annual 35 565 Total non deductible expenses Total living expenses Home Loan Report Expense Item Amount Yearly 1 900 weekly 34 62 Monthly 150 00 Home Loan Details Home Value Amount owing 336 000 50 O00
33. key to return to the previous PIA view Print Setup Clicking Print Setup opens the Print Setup dialog allowing you to select a printer print properties paper size paper source orientation etc The Print Setup dialog is operating system dependent so its appearance and options vary Exit Clicking Exit causes PIA to save any changes you have made to preferences and to exit the application If you have made any changes to the current document since the last time it was saved PIA displays a message asking if you wish to save the changes Click Yes to save the changes No to exit without saving changes and Cancel to return to PIA PIAFPU PIA User Guide Page 98 PIA Version 7 320 Chapter 7 Menus and toolbars Clicking Report in the menu bar opens the Report menu Undo ctrl 7 The Undo and Redo options allow you to undo changes up to the last 5 changes made Redo ctrl This is useful when changing values to examine What if scenarios with the software If unavailable the option is shown dimmed Undo Ctrl 7 Reda Ctrl Y PIA User Guide Page 99 PIA Version 7 320 Chapter 7 Menus and toolbars 7 3 Report menu Clicking Report in the menu bar opens the Report menu Cash Flow Analysis PIA offers a number of report options Reports can be viewed on screen saved Investment Analysis as a new document using the Save Report As command in the File menu or printed using the Print command in the File menu Each of the repor
34. made here Note that unlike the interest on investment property loans PIA does not treat the interest on the loan for your home as tax deductible even if you were to use an investment property as collateral for the loan The important issue in the eyes of the tax office is the purpose of the loan not what is used as security for it Interest 26 554 25 806 24 996 23 169 17 097 Loan balance 336 000 326 989 317 230 306 661 282 819 203 588 Loan value ratio 70 00 Your net cost per year The values in the input column of the Loan balance row shows the amount still owing on the loan on your home at the end of the current year The values in the projections columns show the amount owing for each of the years displayed taking into account all repayments and redraws Note that at the outset this may include refinance costs if the loan represents a consolidation of several principal and interest loans see 4 5 Home Loan Balance dialog Clicking on the Loan balance row title or double clicking on the value in the input column opens the Home Loan Balance dialog This box explains how the balance of the loan is derived taking interest redraws and repayments into account The annual loan balances are a function of initial balances items added and items paid In general the only item added is the interest bill if you also have a credit line redraws are shown here see 4 11 4 12 Items paid are generally just the regular home loan payment but yo
35. net income is simply the non property taxable income plus any non property non taxable income The non property taxable income is calculated as the total non property income e g salary and wages less the total non property deductions e g work related expenses The value in the input column shows the anticipated average annual rate of increase in this non property net income from the time that it is indexed by default this is from the first year You can overwrite this value if indexation is from the first year The values in the projections columns show the anticipated income for the selected years based on the rate of increase indicated in the input column Joint Net Income dialog Clicking on the Joint net income row title opens the Joint Net Income Non Property dialog This shows the derivation of the joint net income shown in the Wealth Builder spreadsheet Non Property Income Non property income includes salary wages and any other income excluding rents Non Property Deductions These include any work related and other deductions but exclude property related deductions Non Property Taxable Income Your non property taxable income is total non property income less total non property tax deductions Non Property Net Income Non property net income is non property taxable income plus any non taxable income Non taxable income Non taxable income for both investor and partner can be entered on the Non taxable in
36. of the loan whichever is lesser Loan costs Loan Costs dialog Loan costs are made up of several components some of which will be a function of the size of the loan while others may be a flat fee These will vary between institutions but as a general guide expect loan costs to be between 1 to 2 of the total loan including costs Loan eligibility Criteria for establishing whether you would qualify for an investment loan under the criteria set down by any financial institution Loan term The number of years it will take to pay out the loan completely Loan type The loan type can be interest only I O principal and interest P amp I interest capitalised c or a combination of the above split loan Loan value ratio LVR The ratio of the total loan to the total value of the properties used as security for the loan Low value pool Depreciation of Fittings dialog These items are under 1000 and are to be written off using the diminishing value method at a rate of 37 5 but at only half this rate 18 75 in the year of acquisition MAPI Messaging Application Programming Interface a Microsoft interface specification that enables various mail applications and workgroup applications including E mail and fax to run through a single client MAPI is required for some of PIA s email related functions Marginal rate Marginal tax rate Tax Credit dialog The rate of tax paid on the next dollar earned Using this method for cal
37. or linked loans and capitalising interest or expenses or both are Principal payments reviewed fully in 6 10 Cash outlays Investment surplus The following rows in the investment property area of the Loans summary spreadsheet are identical to those in the Home Loan Analysis spreadsheet Please see Chapter 4 for details m Home value row m Refinance costs row Total repayments row Total redraws row The rows that are not identical to those in the Home Loan Analysis spreadsheet are described in the following Loan interest row Loan balance row Total LVR loan value ratio row Term remaining PIA User Guide Page 89 PIA Version 7 320 Chapter 6 Linked loans spreadsheet Total redraws 0 0 0 0 0 Loan interest 8 00 26 554 25 806 24 996 23 169 17 097 Loan balance 336 000 326 989 317 230 306661 282 819 203 588 The Loan interest row is a combination of the Interest rates see 4 14 and Interest 4 15 rows in the Home Loan Analysis spreadsheet The value in the input column shows the average annual interest rate over the term of the loan If you select and overwrite this value the interest rates for all years are set to the new value The values in the projections columns show the projected total interest component for each year PIA calculates these values so no entries can be made here Clicking anywhere in the Loan interest row opens the Interest Rates dialog see 4 14 PIA User Guide Page 90 PIA Versio
38. or on any of the values in the projections columns opens the Debt service ratio dialog Debt service ratio The Debt service ratio area shows you the derivation of the DSR shown in the spreadsheet It also allows you to enter eligibility factors for various types of income It also allows you to enter a risk adjustment factor to load outgoings Example a risk adjustment factor of 110 will add a loading of 10 to outgoings PIA then calculates the DSR deemed payments divided by eligible income Annual Debt service ratios The Annual Debt service ratios Debr tnte Ratio area shows annual DSRs over projected years Again deemed payments divided by eligible income gives the debt SOLUCE Income Fercent Eligible Debt Servicing Payments service ratio Eligible Income Investor 65 000 anz 19 500 Homeloan payments 35 565 Partner 30 000 3000 Inv loan payments 30 346 Rents 17 636 14 269 9 Ask adjustment factor 1004 Other 0 100 0 Total 172 836 420769 Deemed payments 65 914 m Debt Service Ratio aa oD Debt service ratio deemed payments eligible income 154 122 Annual Debt Service Ratios Start of year Aur Sur Ayr 10yr Properties Deemed payments 65 914 65 914 65 914 65 914 Eligible income 44 450 46 259 50 033 6073 Debt service ratio 14824 14224 13224 10824 PIA User Guide Page 80 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Debt service ratio 154 148 142 132 10
39. principal place a ik 3 of residence is usually exempt Neither the Northern Territory nor New Zealand impose the tax In PIA the tax is treated as a rental expense However as it can t be automatically calculated from the investment property alone this calculator provides a tool for calculating it for your specific situation You can then enter the calculated tax into the Rental Expenses template The calculator is not linked directly with the Rental Expenses dialog The tax payable must be entered manually in one of the fields The field titles can be edited WI ogr gid gov au Land Tax Scale Clicking the Land Tax Scale button opens the Land Tax E tTRUE bate IH Scale dialog allowing you to view and edit the scale 7 Queensland 4500 itr Te Threshold 750 000 45 7 1 250m eee 2 000m 3 000m Add Renove Modify PIA User Guide Page 116 PIA Version 7 320 Chapter 7 Menus and toolbars Borrowing Capacity Calculator Clicking Borrowing Capacity opens the Borrowing Capacity Calculator This calculator enables you to estimate the maximum amount you would be able to borrow to purchase investment property This amount is assumed to be limited by your Loan value ratio LVR and or your Debt service ratio DSR The value of the investment property is also calculated The LVR is a measure of the loan security and is calculated as total monies borrowed including the new loan divided by the total value of
40. required Average annual inflation rate 2 U0 Years needed to achieve goal 2029 PIA User Guide Page 119 PIA Version 7 320 Chapter 7 Menus and toolbars Superannuation Calculator Clicking Superannuation opens the Superannuation Calculator This enables you to calculate the total amount accumulated in a superannuation fund based on the parameters you enter into the calculator PIA then works out the total superannuation both nominal and adjusted to today s dollars that accumulates over a specified period for the specified parameter values All calculations are made monthly Your super contributions are measured as a percentage of your current salary A percentage of these contributions is lost in tax before they are invested The total amount invested achieves earnings at the rate of return of return specified less the administration fees which are expressed as a percentage of the total amount invested The funds remaining after taxation at the rate specified are reinvested Net contributions i e net of contributions tax are assumed to be made at the start of BINNA LLL TROLL a each month Net earnings i e net of earnings tax on the total balance are added at the end of the month after which Age nawi ot Super contribution g goz administration fees are calculated and ae E ENAT subtracted from the balance Age at retirement 65 Tas on contributions 15 003 Curent salary 60 000 Administration fee 2 00 Growth in s
41. s value Information only dialogs Some dialogs only display information They do not Internal Rate of Return allow entries to be made Their purpose is to show the derivation of a value Bar Cash Flow Today s The Internal Rate of Return is an example of such a Initial investment 30 000 30 000 dialog Piece ee a Tur 3687 4651 2yr 3 090 2 999 Sr 3 140 2 988 Sy 2 896 2 649 10yr 2 049 4 698 Total investment 55 926 Equity at end 180 422 149 474 Net present value 93 549 Internal rate of retum 14 432 Inflation rate 200 Real return Interactive dialogs The majority of dialogs are interactive they allow you to make entries thus influencing the calculation of a variable The Purchase Costs dialog is an example of an interactive dialog It contains fields of various types Information field Such as the value of Purchase price This is a non editable field here as the value is entered in the Property Value dialog see 3 2 in the Investment Analysis spreadsheet input column see Chapter 3 or in the Data Entry Check List see 2 4 Data entry field such as the value of Stamp duty Purchase Costs Text entry fields such as Other costs r Purchase Costs which can be overwritten Purchase price Radio buttons such as Capital cost and Revenue cost when one is selected the Stamp duty other is deselected Conveyancing costs Tick box such as Uses Qld indicating that the Quee
42. the View menu opens the Wealth Builder spreadsheet This can also be opened by clicking the Wealth Builder icon The Wealth Builder spreadsheet is fully described in ES Chapter 5 Linked Loans Clicking Linked Loans line in the View menu opens the Linked Loans spreadsheet This can also be opened by clicking the Linked Loans icon The Linked Loan Analysis spreadsheet is fully described in Chapter 6 Toolbar Clicking Too bar on the View menu shows or hides the toolbar Status Bar Clicking Status Bar on the View menu shows or hides the status bar r PIA User Guide Page 121 PIA Version 7 320 Chapter 7 Menus and toolbars 7 8 Settings menu Clicking Settings in the menu bar opens the Settings menu This Credit Line menu contains commands that allow you to set various options that N will be used by PIA Link Home amp Investment Loans Link Options Capitalise Interest Capitalise Expenses Capital Gains Tax Stamp Duties Sales Commission Tax Scales Selling Costs NRAS Options SMSF Options Set Country Defaults Save Default Template Delete Default Template Set Font Preferences Credit Line Clicking Credit Line in the Settings menu instructs PIA to set the loan model in the current spreadsheet to that of a credit line i e one in which repayments are maximised in accordance with the investor s available disposable income To do this PIA calculates the total income of both th
43. to be indexed each year in line with changes in the market rents It is also possible to specify whether or not total rental deductions NBAS tay incentive 3981 are to be adjusted for the proportion of income that is deemed non assessable non exempt NANE The State component of the Federal component TABE tax incentive 25 of total tax incentive is deemed NANE income State component NANE 2 495 PIA User Guide Rental income 14 269 Rental WANE income 16 764 Rentak R ental MANE income aba fee Total rental deductions Deductions to be claimed Page 125 PIA Version 7 320 Chapter 7 Menus and toolbars SMSF Options Clicking SMSF Options brings up the Self Managed Super Fund Options dialog z Purchasing property in Accumulation Phase the name of a self ie y ile sh eg managed super fund Fund Income 65 000 Apply pension mode in year SMSF is similar in Fund Expenses Tax rate on earnings 0 00 principle to purchasing pee ET 100 000 in the name of a single Tax rate 15 00 Earnings thre sits investor where the investor is the SMSF CGT Discount 33 33 Tax rate above threshold 15 00 Naturally many of the Capital Gains Tax 0 00 parameter values will be different The SMSF tae i S becomes the investing Display annual surplus in spreadsheet I Apply SMSF settings entity and tax scales and tax rules must be those Cancel pertaining to superannuation funds The
44. to calculate personal income tax liability Scales vary from country to country see 7 7 Tax withholding variations Adjustment of tax withheld See Tax Variation Application in 7 2 Today s dollars Because of inflation the purchasing power of a dollar in the future will be less than today PIA uses discounted cash flow methods converting everything into today s dollars in order to make correct investment comparisons See IRR and NPV PIA User Guide Page 139 PIA Version 7 320 Appendix B Table of figures and dialogs Appendix B Table of figures and dialogs About PIA Accumulated Cash Savings Advanced Options Annual Rental Income After tax Cash Flow Agent s Commission Annual and Special Rental Expenses Annual Interest Rates Annual Investment Annual Living Expense Budget Annual Living Expenses Annual Rental Income Asset amp Liabilities Bank Comparison Borrowing Capacity Calculator Calculator Capital Gains Tax Calculator Capital Gains Tax Settings Capital Growth Calculator Color Congratulations Credit Line Payments Current Investment Portfolio Current Taxable Income Customise Investment Portfolio Customise Investment Report Data Entry Check List Debt Service Ratio Delete Files Depreciation of Building Depreciation of Fittings Disclaimer Text Disclaimer Elements of the PIA spreadsheets Elements of the PIA window Equity Expense Item Extra Payments Feedback Font Help Topics H
45. value of the investor s home over the projection period PIA calculates these using the specified sequence of annual capital growth rates However the property value in any year can be selected and overwritten in which case PIA recalculates the corresponding Capital growth rate parameter PIA uses the value of the investor s home to calculate the Joan value ratio see 4 17 an index often used by banks to determine your eligibility for refinancing the loan Home Value Growth dialog Clicking on the Principal Residence row title or double clicking on the value in the input column opens the Home Value Growth dialog This dialog allows you to change future property values by entering them in the Property value line and growth rates by entering them in the Growth rates line Values may be set for any year up to 40 years For details of setting projections please see 3 1 It is not necessary to obtain an official valuation on the value of your property A phone call to a reputable real estate agent is sufficient to establish an approximate value for your own home Home Value Growth Endofyear Average Ayr Ayr Sur Syr 10yr Property value ESM 376 200 393129 410 920 448 625 559 069 Growthrates 4 50 450 450 450 450 4 50 PIA User Guide Page 52 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Home value 480 000 508 800 539 328 571 688 642 348 859 607 Capital growth rate 6 00 6 00 6 00
46. years is set to the new value The values in the projections columns show the anticipated increase in the property value over the projection period PIA calculates these using the specified capital growth rates Property Value dialog Clicking on the Investment property value row title opens the Property Value dialog This allows you to make adjustments for renovations or the additional purchase of a furniture package It also allows you to enter a different Market value if this is not the same as the purchase price of the property Book value see 3 2 Investment Property Growth dialog Clicking on a cell in the projections columns or double clicking the cell in the Input column opens the Investment Property Growth dialog which allows you to specify growth rates year by year see 3 7 Inv property value 6 00 400 000 424 000 449 440 504 991 675 792 Total inv properties i 1 1 1 1 Total of all loans 715 356 706 345 696 586 674 571 601 412 The values in the projections columns of the Total inv properties row specify the cumulative number of investment properties If you already have existing investment properties that you have specified in creating a portfolio see 7 4 these properties will be included When properties from a portfolio are included the row title reads Total inv properties pf You may enter values directly into the projections columns however you will not be able to specify fewer properties than shown in the p
47. 0 25 2306 135 215 160 601 22 421 5 001 65 914 44 052 140 387 20 214 33 775 113 3853 Chapter 5 Wealth Builder spreadsheet Cash savings 540 000 4 411 10 954 18 721 38 909 119 989 Debt service ratio 154 148 142 132 108 End of Year The values in the projections columns of the Debt service ratio row show the projected debt service ratios DSR for the selected years Financial institutions commonly assess an investor s ability to service a loan based on a comparison of income including that from the investment property with total loan payments The debt service ratio DSR is a guide to loan eligibility It is defined here as the ratio of deemed payments to eligible income Eligible income is that part of gross income that a financial institution will accept as disposable This could be 30 or wages or salary the remainder being required for living expenses and may be 80 of rental income Deemed payments are the financial institution s conservative estimate of future payments allowing for example for an increase in interest rates The total of these qualified incomings must be equal to or greater than total loan payments In most cases these loan payments are adjusted for the risk of interest rate rises so that a total of deemed outgoings is used As a guide a DSR of less than 100 indicates that the loan payments are affordable Debt Service Ratio dialog Clicking on the Debt service ratio row title
48. 0 Chapter 3 Investment Analysis spreadsheet 3 9 Gross rent week row Inflation rate CPI 4 00 4 00 4 00 4 00 4 00 4 00 Gross rent week S350 17 836 18 549 19 291 20 866 25 386 Cash deductions The value in the input column shows the initial gross weekly monthly or annual rental income depending on the current preference in the Rental Income dialog The values in the projection columns show the anticipated annual gross rents after allowance is made for vacancies These values can be selected and overwritten in which case annual values prior to this year remain static even if the inflation rate is changed Rent projections are based on the inflation rate Rental Income dialog Clicking on the Gross rent week row title or double clicking on the value in the input column opens the Rental Income dialog Most values can be selected and overwritten however in the case of holiday letting changes can only be made ona seasonal basis in the Holiday Letting area of the Rental Income dialog Preferences Rental In the Rental Income dialog the Preferences BIME ME HES area allows you to choose the way in which Rental Income 1st Year E rental income is specified either by absolute amount per week month year or season Rent per week Per week holiday letting imply b ield eg l holiday letting or simply by gross yie Potential annual BH 15 600 Per month Rental Income 1st year The Rent per week or mont
49. 0 5893298 571688 642 348 859607 Capital growth rate 005 6 005 6 00 6 00 6 00 600 Home equity 00 181 811 222 098 200 026 359 529 656 019 Amount owing Refinance costs Repayments Regular rnthAyr Extra mthAyr irregular Total repayments Regular mthiyr Irregular Total redraws Interest rates 004 8 00 6 00 6 00 Interest i 25 506 24 996 23 169 Loan balance 17 230 306 661 262 819 Loan value ratio k Your net cost per year Term remaining i 56E 25 565 25 565 oo 565 f This spreadsheet has several useful applications e You can use the spreadsheet to simulate the current home loan by specifying the amount of debt still owing together with the current repayments and interest rates You are then at liberty to assess the impact on the term remaining of making additional regular or irregular payments The spreadsheet shows you both the data you have entered and the projections based on that data or based on default values if these have not been changed e You can also use the spreadsheet to examine the impact of consolidating all your non deductible loans e g home car and personal loans and refinancing them into the one loan with a different term and interest rate The aim here might be to reduce the cash flow burden rather than to reduce the remaining loan term Another example might be to examine the use of a credit line facility where all available monies are deposited and only liv
50. 2l 1047m Loans 640 826 639 995 629 691 623 006 610 243 566 455 Equity 226 36 645 76 145 117 786 OY SF 480 204 Rents 31 429 32057 32 699 34 020 37 560 Expenses 9 253 9 418 9 606 3 994 11 034 Loan payments 5066S 50665 A 668 p0 6bS 5066S Pre tax cash Fow 2A AF2 20 028 fF AB 26 643 a4 142 Hon cash deductions 15 381 16 710 14 4352 11 692 alar Total deductions FOOT HAEE bob 65 530 59 70 Tax credits 117 605 11 935 11 116 10 345 6 730 After tas cash flow 30 000 16 567 16 033 16 460 16 297 15 412 New tazable income 46 416 47 625 AZ le 60 496 Fibs Ween Include property T Create Remove Repot lt lt lt gt Close Under review l 7 Select Current Portfolio Files dialog Clicking the Create button opens the Select Current Portfolio Files dialog To add a property to the portfolio click on a filename in the Directory C Program Files Somerset Plapro Ew Property Files column and then J click the Add button Alternatively you can double click Property Files Property Portfolio the filename To add all the PUG exanplePly ge properties click the Add All Quick tart Example pia N krt button Untitled 30 PIA The file name appears in the Add All Property Portfolio column on the a E right eee You can click a file multiple times if pies it is to be added to the portfolio SETS Gl multiple times Feet eee Remove You can also remove files from the Property Portfolio column ina similar manner us
51. 3 19 993 19 993 Closing balance 205 469 205469 205 469 205469 205 469 chif capitalised fd if deducted from loan PIA User Guide Page 26 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Loan costs Clicking Loan Costs in the Loan Amount dialog displays the Loan Cost dialog see 3 15 Loan Interest amp Type dialog Clicking Loan Type in the Loan Amount dialog displays the Loan Interest amp Type dialog The loan type can be either interest only I O principal amp interest P amp I interest capitalised c credit line CL or a combination of the above In the case of an nterest Only loan there are no Loan Interest amp Type principal repayments in l the Investments row of Loan A the spreadsheet the Loan Interest interest C Principal C Capitalize C Credit loan balance remains static and the interest payments are constant Average From To From To From To From To The row title in the 209546 00 1yr 40yr Investment Analysis spreadsheet is Interest Amount Rate Orly amp Interest Interest Line I 0 poe In the case of a Principal baan Interest Interest Principal Capitalize Credit amp Interest loan is Amount Rate Only amp Interest Interest Line papi anari Average From To From To From To From To with the principal 0i repayments shown in the RE Investments row of the Loan Summary lst year j Loan Type p Capita
52. 6 00 6 00 6 00 Home equity 144 000 181 811 222 098 265 026 359 529 656 019 The value in the input column on the Capital growth row title shows the anticipated average annual rate of capital growth of the investor s home over the range of annual projections If you select and overwrite this value PIA sets the growth rate for all years to the new value The values in the projections columns show the anticipated capital growth rates for the individual years of the projection These values can also be selected and overwritten in which case the change is reflected in the corresponding values of the investor s home Home Value Growth dialog Clicking on the Capital growth row title or double clicking on the value in the input column or projections columns opens the Home Value Growth dialog see 4 2 This dialog allows you to enter property values and or growth rates for any year up to over the maximum projection of 40 years If you change a property value for a particular year PIA recalculates the growth rate for that year Growth rates for subsequent years remain unchanged PIA User Guide Page 53 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Capital growth rate 6 00 6 00 6 00 6 00 6 00 6 00 Home equity 144 000 181 811 222 098 265 026 359 529 656 019 Amount owing 336 000 Home equity is the difference between the value of the home principal residence and the outstanding loan amount at any point in time Ideal
53. 60 724 PIA Version 7 320 bo fe 610 950 1 487 eM 412 BUT AT 2 40 454 Chapter 5 Wealth Builder spreadsheet Loan value ratio 81 76 70 61 40 Rental income 4 00 17 836 18 549 19 291 20 866 25 386 Other income 4 00 95 000 98 800 102 752 111 137 135 215 The value in the input column shows the anticipated average annual rate of increase in rental income for the investment property from the point in time rents are indexed by default this is from the first year see 3 9 If you overwrite this value it resets the rate of increase to this value in all years see 3 8 The values in the projections columns show the anticipated total income from rent including that from any existing property portfolio Annual Rental Income dialog Clicking on the Rental income row title or on any of the values in the projections columns opens the Annual Rental Income dialog allowing you to change the annual rent per property and set inflation indexing For details see 3 9 PIA User Guide Page 72 PIA Version 7 320 5 10 Other income row Rental income Other income Total income 4 00 4 00 17 836 18 549 19 291 95 000 98 800 102 752 112 836 117 349 122 043 20 866 111 137 132 002 Chapter 5 Wealth Builder spreadsheet 25 386 135 215 160 601 The Other income row shows your projected joint non property net income over selected years Rental income is expressed directly in the Wealth Builder spreadsheet Non property
54. 8 End of Year Total value 480 000 932 800 988 768 1 048m 1 178m 1 576m The End of year rows show values for the end of the year as opposed to the beginning of the year End of Year Total value 480 000 932 800 988 768 1 048m 1 178m 1 576m Total loans 336 000 706 345 696 586 686 017 662 175 582 944 The Total value row reflects the total end of year values of all investment properties including any existing portfolio plus the value of your home The end of year value is carried forward to the start of the next year and the value of any new properties is added see 6 7 The value in the input column of the Total value row shows the current value of the investor s home The values in the projections columns reflect the projected total values for all properties principle residence and one or more investment properties for selected years The total value is important in calculating the total joan value ratio when all properties are used as collateral for the loan Total Value dialog Clicking on the Total value row title or on any of the projections columns opens the Total Value dialog See 6 7 Total value 480 000 932 800 988 768 1 048m 1 178m 1 576m Total loans 336 000 706 345 696 586 686 017 662 175 582 944 Net worth 184 000 230 866 303 136 380 798 554 373 1 113m The Total loans row gives and overview of the total of all loans on all investment properties plus the loan on your own home The value in the inpu
55. 8 529 30 120 EE 336 34598 Egg described more fully in 7 4 PPS ERRE i 3 L Living expense projections By default annual living expenses are assumed to increase in line with inflation beatles ears elisa cate Ayr ERT mei 20 You can over ride this assumption and l De a 1 aie tate aK specify your precise living expenses for any year Note that unless you uncheck the Inflation indexed from year check box the remaining years continue to increase by the specified rate r Living Expense Projections In the year in which the loan is repaid the redraw column may show a much lower figure than the previous years This is because redraws are only made until the loan is fully cleared repaid The loan account then goes into credit or is closed by the borrower PIA User Guide Page 60 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Regular mth yr 0 Irregular 0 0 0 0 0 Total redraws You can enter irregular ad hoc unscheduled redraws for projected years directly into the appropriate projections columns on the spreadsheet Such entries do not affect redraws in other years Irregular 0 0 0 0 0 Total redraws 0 0 0 0 0 Interest rates 8 00 8 00 8 00 8 00 8 00 8 00 The Total redraws row shows the annual projected totals of all redraws Because this row contains calculated fields only no entries can be made here Total redraws 0 0 0 0 0 Interest rates 8 00 8 00 8 00 8 00 8 00 8 00 Interest 26 554
56. 996 24 996 35 565 35 565 Fur 10yr 295 215 Z22057 23 169 17 057 23 169 ojaks 35 565 35 565 Closing balance lFloans were linked Page 91 326 909 of 230 306 661 202 019 203 596 PIA Version 7 320 Chapter 6 Linked loans spreadsheet 6 8 Total LVR loan value ratio row Loan balance 336 000 326 989 317 230 306 661 282 819 203 588 Total LVR 81 29 Your total net cost per year Term remaining 17 7yr 43 770 43 046 43 311 43 301 41 679 The value in the input column shows the total to oan value ratio for the home loan and investment loan Clicking on the Total LVR row title displays the Total Loan Value Ratio dialog Total Loan Value Ratio dialog This shows the projected annual combined loan to value ratio LVR for both your home and your investment property The total LVR is used by the bank to determine whether you qualify for the loan with or without mortgage insurance Total Loan Value Ratio Years Initial yr ZT ST Flt 10yr m Loans Homeloan 252 000 244 992 oat Are 229 419 211512 154 116 Investment loan 285 469 209 469 209 469 209 469 209 463 209 463 Total loans 537 469 530 460 522 945 a1 4 557 456 501 433 555 Values Home value 360 000 376200 393 129 410 820 445 625 559 069 Property value 300 000 313 500 32 B08 342350 of 3 095 465 891 Total value 660 000 bod 00 fell fay foal p22 480 1 025m Loan Value Ratio A Toal YA 81 434 Te gi T2 596
57. Cash positive by The figure above shows the PIA interface with the Investment Analysis spreadsheet open This is the default spreadsheet and the one in which you will spend most time Title bar The title bar shows the name of the file and the name of the software Somerset PIA On the right of the title bar are the standard Windows boxes for minimizing maximizing and closing the window Menu bar The menu bar shows the names of the PIA menus Clicking on a menu name opens a drop down menu The menus and their items are described in detail in Chapter 7 Toolbar Beneath the Menu bar is the Toolbar consisting of a series of icons each of which provides quick access to a commonly used function see also Chapter 7 If you position the mouse pointer over an icon a tool tip appears telling you the meaning of the icon For example you can click the Check List icon shown on left if you wish to return to the Data Entry Check List New Open Save 74 r Spreadsheets Dy oe lS Undo redo L Data Entry Check List Scroll Buttons PIA User Guide Page 10 PIA Version 7 320 Chapter 2 The User Interface Data Entry Check List Clicking this symbol takes you back to the Data Entry Check List see 2 4 New users of PIA in particular find this an easy way of entering data for a new property Undo redo icons Cu gt The Undo and Redo icons allow you to undo changes up to the last 5 changes made This is useful when
58. Clicking on the Regular mth yr row title or double clicking on the value in the input column or clicking a value in a projections columns opens the Home Loan Repayments dialog This shows a summary of all payments and redraws based on entries in the three repayments and three redraws rows The various types of repayment and redraw are described in the following sections Credit line check box Clicking the Use credit line to repay home loan check box turns the Credit line option on or off see 3 8 and or 7 7 Home Loan Repayments Bars Repayments Regular rth 2 64 35 565 25 565 35 565 35 565 25 565 Additionalmth 0 0 0 0 0 0 lreqular yr E U T 0 i 0 0 0 Invest surplus yr 0 0 Total pr 35 565 35 565 35 565 35 565 25 565 r Redraw Regularimth 0 0 0 0 0 Iregular yr 0 0 0 0 0 i 0 0 i 0 Totalyr F Use credit line to repay home loan gt OE Cancel PIA User Guide Page 57 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet 4 8 Extra repayments row Regular mth yr 2963 77 35 565 35 565 35 565 35 565 35 565 Extra mth yr 0 0 0 0 0 0 Irregular 0 0 0 0 0 The value in the input column shows the extra monthly loan repayment and the values in the projections columns show the equivalent annual amounts repaid in the specified years This changes if a credit line has been specified Under a credit line all after tax income is channelled into the mortgag
59. DSR is then simply the ratio of deemed loan payments to eligible income As a guide the DSR should be below 100 If the DSR is greater than 100 then the loan is less likely to be granted e g DSR Loan payments x 100 30 wages 80 Rent PIA User Guide Page 65 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet ed Somerset a The Wealth Builder spreadsheet is divided into two areas This chapter describes each row and the associated dialogs from top to bottom For your orientation the row being described is shown with the row above and below If you have not made any changes projections are based on default values PIA User Guide Page 66 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet John Doe for personal use only Wealth Builder Input Projections over 10 years Start of Year 2013 1yr 2yr 3yr 5yr 10yr Home value 6 00 480 000 508 800 539 328 605 989 810 950 The value in the input column of the spreadsheet shows the year from which PIA calculates future wealth building The year variable is common to all spreadsheets within PIA The projections columns show the projected results for the years selected Note that all variables in the upper part of the spreadsheet refer to values at the start of the year whereas those at the bottom refer to values at the end of the year For details of setting projections see 3 1 Start of Year 2013 1yr 2yr 3yr 5yr 10yr Home value 6 00 480 000 508 800
60. Help Dig SE 5 HANSMREGAR l Ae Es Cl Disclaimer Mote that the computer projechons listed above simply illustrate the oufcome calculated from the input values and the assumptions contained in the model Hence the f gures can be varied as required and are In no wap intended fo be a guarantee of future performance Although fhe information is provided in good faith if is also given on fhe basis that no person using fhe tnformanion in whole orin part shall have any claim against John Lough ifs servants employees or consultants This is where you can make pour additions fo fhe standard disclaimer PIA User Guide Page 127 PIA Version 7 320 Chapter 7 Menus and toolbars Logo ala Clicking Logo in the Settings menu opens the Logo dialog This allows you to load a jpeg image of your company logo to be displayed r Logo Dimensions in any generated reports The exact size and position of the logo can be fine tuned in the Width cm Logo Dimensions area Height lines E Text Offset crn 2 54 Your Company Hide logo w Load Image lear Image Defaut F OF Cancel Set Font Clicking Set Font in the Settings menu opens the Font dialog This allows you to customise fonts used in spreadsheets and reports Font Font style eee The default font is Times New Times Hew Roman E e E Roman Regular 10 point The m Sey santas ene Pisa ans 0 spre
61. PIA User Guide Property Investment Analysis software The essential analytical tool for property investors oie P Publisher Somerset Financial Services Pty Ltd ABN 25 623 732 311 P O Box 615 Cleveland QLD 4163 Phone 61 07 3286 4368 Website www somersoft com au Fax 61 07 3821 2005 Technical support support somersoft com au Please note that the domain name is somersoft not somerset 1st Edition May 2003 2 Edition Jan 2005 3rd Edition Aug 2007 4 Edition July 2008 5 Edition July 2010 6 Edition Apr 2013 The PIA User Guide was written by Williams Technical Communication Pty Ltd and lan Somers Copyright This publication is Copyright 2005 Somerset Financial Services Pty Ltd All rights reserved No part of this publication may be reproduced stored in any retrieval system or transmitted in any form or by any means electronic mechanical photocopying recording or otherwise without the prior written permission of Somerset Financial Services Pty Ltd Disclaimer This publication is designed to provide authoritative education and training in the use of Property Investment Analysis software While Somerset Financial Services Pty Ltd has taken all reasonable care in the preparation of this publication it may contain typographical errors or technical inaccuracies Furthermore as tax laws are constantly changing the accuracy of this information cannot be guaranteed Changes will be made periodically and without notice
62. Refinance costs If you are refinancing the total loan and have associated finance costs click on the Set Finance Costs button see 4 6 and ensure that the Refinance not applicable check box is unchecked If you are not refinancing check the Refinance not applicable box and they are shown as zero Repayments Consolidation and refinancing is normally done to save on interest costs or to reduce the repayment burden If you wish to continue make the same total repayments and thereby reduce the remaining term and save on interest costs check the Maintain current payments check box To reduce the repayments simply specify a new lower monthly payment Refinanced Home Loan In the Refinanced Home Loan area the Current amount owing line shows the sum of the amounts from each of the Principal amp Interest loans listed above If you check the Refinance not applicable check box the Refinance costs line is set to zero If you do not check the Refinance not applicable check box the Refinance costs field in the dialog shows the total refinance costs specified in the Home Loan Refinance Costs dialog which opens when you click on the Set Refinance Costs button This is fully described in 4 6 below The Total amount owing line includes any refinance costs if applicable The New monthly payment line shows the sum of the monthly payments listed above if you check the Maintain current payments check box or you can specify them as required On return to t
63. Save as type Finance Cancel Components are automatically assigned the following file extensions Property component PRP Finance component FIN Investor component INV Components can be retrieved and loaded into any document at any time replacing the corresponding information PIA User Guide Page 97 PIA Version 7 320 Chapter 7 Menus and toolbars Page setup Clicking Page Setup opens the Printer Page Setup s dialog allowing you to make adjustments to the page Printer Page Setup setup options for printing Margins for the first and subsequent pages can be Margins specified in centimetres First Page Other Pages A header field can be selected for display on pages 2 onwards e g property address licensee name client Left margin cm 2 54 name etc 2 54 Top margin crn fo fo Text displayed in colour on screen e g red for negative values is printed black by default Checking the Print text in colour check box prints the text in the same colour as shown on screen Print test in colour Header BEnELEmEE Default Cancel Print Clicking Print opens the Print dialog allowing you to enter specifications and properties for printing the selected document The Print dialog is operating system and printer dependent so its appearance and options vary Print Preview Clicking Print Preview displays the selected document on the screen as it will appear when printed Click the Close button or press the ESC
64. User Guide is based on Version 7 5 Edition 01 PIA software is subject to change without notice Documentation may be changed to reflect changes to PIA software and as the result of user feedback Your feedback on the documentation is welcome Please use the email function at the Somersoft website www somersoft com au Updates to this PIA User Guide and the PIA Quick Start Guide will be published on the Somersoft website Thank you PIA User Guide Page ii PIA Version 7 320 Chapter 1 1 1 1 2 1 3 1 4 Chapter 2 2 1 2 2 2 3 2 4 2 9 Chapter 3 3 1 Chapter 4 4 1 4 2 4 3 4 4 4 15 4 16 4 17 4 18 4 19 Chapter 5 5 1 D2 5 3 5 4 5 5 Contents Welcome to PIA Overview of PIA structure Tips on finding information Conventions Versions User Interface Congratulations screen Welcome screen Specify Country Defaults dialog Data Entry Check List Elements of the PIA window Elements of the PIA spreadsheets Dialogs Preferences Windows and sizing Investment Analysis spreadsheet Year row Property value row Purchase costs row Investments row Loan amount row Equity row Capital growth rate row Inflation rate CPI row Gross rent week row Interest row Rental expenses row Pre tax cash flow row Depreciation of building row Depreciation of fittings or chattels row Loan costs row Total deductions row Tax credit row After tax cash flow row Rate of return IRR row Pre tax equivalent row Your cost i
65. a function of initial balances items added and items paid In general the only item added would be the interest bill If the rental expenses were to be capitalised they too would be added to the loan If capital improvements renovations were carried out in later years their cost would also be added to the loan Unless interest is capitalised capitalise interest it is usually the main payment Other payments could include principal payments for a principal amp interest loan cash outlays to pay for any capital improvements ex home loan payments if the loan is linked to a home loan and rent and tax credits if used to repay the loan principal Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous five years Some items in this dialog are followed by a c or a d c indicates that amounts in this row have been capitalised i e borrowed d indicates that the amounts in this row have been used to repay debt Investment Loan Balance Year Tyr 2yr dpi Spr 10yr Initial losn balance 205 469 285 469 285 469 285 469 295 469 E LoanrAddtions Interest added 13 983 139583 133653 13353 13353 Expenses c Renovations Total 13 984 9 993 19 983 19 5983 19 993 Loan Payments Interest paid 19 983 19 983 19 983 19 983 19 983 Principal paid Cash outlays Ex home payments Rents d Tax credits d Total 193 983 19 983 13 90
66. a percentage of the property value PIA User Guide Page 31 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Annual Rental Income dialog Clicking Annual Rent in the Rental Income dialog or double clicking on any of the annual values in the Gross rent week row of the Investment Analysis spreadsheet opens the Annual Rental Income dialog This allows you to enter annual rent values for individual years and to control how those rent values are projected forward If you make a change to a particular year the oy values for subsequent years are still indexed Year ey Sir ot 10yr according to the settings in the Rental Projections part of the Annual Rental Income SSL ter 15 594 15 906 16 548 18 271 Rental Projections If the nflation indexed from year check box is checked rents are projected forward from i yer ate perdi wy pene tyr eet 20k the year specified by the rate of inflation 4 anar i Cener AOL Sat tega aaea ene whilst rents for earlier years remain static irrespective of subsequent changes to the inflation rate This does not mean that these rents are made to be the same If rents are not indexed check box not checked all annual rents remain static and any changes made to the individual years do not impact the annual rent rental income values of later years Annual Rental Income Rental Projections Use the toolbar scroll buttons gt gt gt lt lt lt to s
67. adsheets and reports are Pit tres Mentana a paS optimised to display with a font size F Times New Roman Ph Bold of Times Roman 11 point F Times New Roman Sp Bold Italic If you exceed this size some fields EP Times New Roman IP may overlap and pagination may not F Tools be optimal F Tracks pa If you wish to enlarge text to make it easier to read on screen it is better m Sample to use the Magnify command described later in this section aBbYyzz Script Westem PIA User Guide Page 128 PIA Version 7 320 Chapter 7 Menus and toolbars Preferences Clicking Preferences in the Settings menu opens the Preferences dialog Consisting of four pages called tabs this dialog enables you to enter your preferences regarding the Investment Analysis spreadsheet Bottom Line directories in which you wish to store files as well as your choice of magnification and colours The options are described below Display tab The top part of the Display tab contains the Investment Spreadsheet Bottom Line preferences area This area contains eight radio buttons that allow you to select how you would like the bottom line of the Investment Analysis spreadsheet to be presented Click To display Pre tax equivalent Internal Rate of Return IRR and Pre tax Equivalent of IRR Net present value IRR and Net Present Value Real rate of return IRR and Real IRR i e IRR adjusted for inflation Cash on cash return IRR and C
68. age 9 PIA Version 7 320 Chapter 2 The User Interface 2 5 Elements of the PIA window Title bar Spreadsheet all Untitled Somerset Pla Seles File Edit Report Graphics Investor Calculator wiew Settings Help Daal fe A kali eS lin G lt gt John Dough for personal use only Loestnent Analysis Projections over 10 years End of year lyr 2yt ayt Syy l yr Froperty value 313 500 S27 608 342550 ETERS 45 891 Purchase costs Investments Loan amount 285 469 285 469 285 469 285 469 285 469 Equity 28 031 42139 56 281 88 260 180 422 Capital growth rate 4 50 450 4 30 4 50 4 30 Inflation rate OPT 2 00 2 00 2 00 2 00 2 00 Gross rent week 15 288 15 594 15 906 16 548 12 271 Cash deductions Interest 1 0 19 983 19 983 19 983 19 953 19 983 Retital expenses 4 Ald 4 40 4 589 4 TT S27 Pre tax cash flow 9 106 5 089 8 607 8 409 6 984 Non cash deductions Deprec of buiding 3 730 3 730 3 730 3 730 3 730 Deprec of fittings 2 588 Soe 2 443 1 260 413 Loan costs goy ggg ggg ggg Total deductions 31 730 ATEA 31 764 30 766 20 417 Tax credit single 5 419 5 799 S527 5 313 4933 Affer tax cash flow 3 687 3 090 3 140 2 896 4 049 Rate of return IRE Your cost income per week Pre tax equivalent Tl 59 60 36 39 A aa u Property Details Address Description Property cost 300 000 Total cost Gross rent Grr 1 15 288 Cross yield Het rent yr T 10 877 Het yield Cash neutral investment 107 191
69. age insurance Mortgagee s solicitors fees Valuation tees Registration of mortgage Registration of title Search fees co oS m Other loan costs Tz Mr DOER mar a a mar eomm wj LT oe Total costs Total loan including casts i Loan cost write off period Page 41 coy oe ee idh a 5 ll Fa u Eon CT i M d Cost Flat Fee ca a a a a 2 711071 PIA Version 7 320 3 16 Total deductions row Loan costs Total deductions Tax credit single Chapter 3 Investment Analysis spreadsheet 4 931 986 986 986 45 806 47 224 45 902 44 706 65 000 9 929 10 165 9 392 8 323 43 876 6 850 The input column of the Total deductions row remains blank as the purpose of this row is to show the total annual tax deductions The projection columns show the projected annual tax deductions for the specified years Total Tax Deductions dialog Clicking on the Total deductions row title opens the Total Tax Deductions dialog This shows the derivation of the total tax deductions This is made up of both the cash deductions interest expenses and non cash deductions depreciation and loan costs Use the toolbar scroll buttons gt gt gt There are two variations on the norm 1 Where purchase costs have been specified as a revenue cost such as for properties purchased in the ACT see 3 3 these also appear in the dialog as show
70. ages the remainder tend to be flat fees The Total costs line shows the total loan costs as a percentage of the total loan and as a dollar amount The Total loan line shows the total loan excluding any refinancing costs Refinance costs If after entering the values for the refinancing costs you decide to apply these to the loan check the Apply to loan check box The Total loan line now includes these refinance costs When you click OK PIA recalculates the term remaining for the new loan balance If you do not check the Apply to loan check box the costs are not added to the loan and have no effect Home Loan Refinance Costs kd Cost Component Cost Flat Fee Establishment fees Mortgagee stamp duty m is i E ss z r PI Oi oo Co x Total costs Totalloan r Refinance costs F Apply to loan Cancel E PIA User Guide Page 56 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Repayments Regular mth yr 2963 77 35 565 35 565 35 565 35 565 35 565 Extra mth yr 0 0 0 0 0 0 PIA allows you to take regular monthly extra monthly and irregular annual loan payments into account in repaying your home or consolidated loan These types of payment are covered by the next three rows of the spreadsheet The value in the input column represents the regular amount repaid monthly The amounts shown in the projections columns show the amounts repaid each year Home Loan Repayments dialog
71. al addition for a resort or holiday unit so that it can be rented fully furnished Furniture is a depreciable item and the cost is taken into account when calculating the total loan required However for the purposes of the investment analysis furniture is not considered as part of the property value subject to capital growth General fittings Depreciation of Fittings dialog When the property price is specified PIA estimates the total value of fittings to a percentage of that property price Individual items are lumped 50 50 into the General fittings and Low value pool categories If you choose to revise these values they will not change automatically when you change the property price Gross yield Rental Income dialog The actual annual rent expressed as percentage of the property value before deduction of rental exe Home equity Home loan analysis spreadsheet Home equity is the difference between the value of the home principal residence and the outstanding loan amount at any point in time enses Home loan Home loan analysis spreadsheet In PIA home loan refers to the loan on the investor s home or more broadly as a consolidation of all non deductible loans Indexed variables Inflation Rate dialog By default PIA uses the inflation rate to project rental income rental expenses taxable income and living expenses These are referred to as indexed variables as their annual values are indexed to the rate of inflation I
72. alary 2 004 Rate of returni PANIA Current balance 23 000 Tax on earnings 12 00 Bec Final amount 759703 Inflation rate 2 00 Final amount in today s Ho 344 098 PIA User Guide Page 120 PIA Version 7 320 Chapter 7 Menus and toolbars Clicking View in the menu bar opens the View menu Data Entry Check List Most of the commands in the View menu can also be accessed via the toolbar y Investment Analysis Home Loan Analysis ESP NN Lat be opa w ToolBar Status Bar Data Entry Check List Clicking Data Entry Check List on the View menu opens the Data Entry Check List dialog This can also by opened by clicking the Data Entry Check List icon For details of the Data Entry Check List see Chapter 2 By default PIA opens the Data Entry Check List every time you create a new file You can change this setting in the Preferences item under the Settings menu see 7 7 Investment Analysis Clicking Investment Analysis in the View menu opens the Investment Analysis spreadsheet I This can also be opened by clicking the nvestment Analysis icon The Investment Analysis spreadsheet is fully described in Chapter 3 Home Loan Analysis Clicking Home Loan Analysis line in the View menu opens the Home Loan Analysis spreadsheet N This can also be opened by clicking the Home Loan Analysis icon The Home Loan Analysis spreadsheet is fully described in Chapter 4 Wealth Builder Clicking Wealth Builder line in
73. amp Duty Calculator This calculates the Chapter 7 Menus and toolbars Inflation Calculator Initial pear 2006 Initial price 15 Final pear 2010 Final price 16 54 Number of years 4 Increase 1 260 Average annual inflation 2 00 Income Tax Calculator T axable income Income tax Medicare lewy Total tas owing 11 185 state stamp duty owing on an investment property bought for a specified stamp Duty Calculator price according to the currently selected stamp duty scale To select a different stamp duty scale or to modify the current scale click on Stamp Duties in the Settings menu to display the Stamp Duties dialog see 3 3 PIA User Guide Scale Purchase price Stamp duty 4 300 aJ em Page 114 PIA Version 7 320 Sales Commission Calculator Clicking Sales Commission opens the Sales Commission Calculator This calculates the standard sales commission for the sale of a property for a specified value according to the currently selected sales Chapter 7 Menus and toolbars commission scale To select a different sales commission scale or to Scale modify the current scale click on Sales Commission in the Settings menu to display the Sales Commission dialog see 7 7 When first opened the Sales Commission Calculator shows the value of the investment property in the right most column of the Investment Analysis spreadsheet In many places sales commission scales are deregulat
74. an balance equity interest loan payments loan redraws and net cost over 30 years e Summary statement indicating loan repayment period and total net repayments including interest payments This command is only available from the Home Loan Analysis spreadsheet Wealth Builder Analysis Clicking Wealth Builder Analysis generates a report showing the accumulation of investment properties specified in the Wealth Builder spreadsheet The report includes the spreadsheet projections of property values income and expenditure as well as graphics of Investment Equity amp Net Worth Loan to Value amp Debt Service Ratios and After Tax Cash Flows Linked Loan Analysis report Clicking Linked Loan Analysis generates a report describing the interest and repayment schedule for both the home and investment loans This is a detailed report that includes the projections from the Linked Loans spreadsheet together with detailed analysis of projected loan payments and balances equity and tax benefits This command is only available from the Linked Loan spreadsheet and when the loans have been linked see Chapter 6 PIA User Guide Page 100 PIA Version 7 320 Capital Gains Tax report Chapter 7 Menus and toolbars Clicking Capital Gains Tax generates a Capital Gains Tax Calculation report This report outlines CGT legislation and shows how the capital gains tax liability for Australia would be calculated if the investment property were to be sold at
75. an is shortened accordingly The total net cost of both the investment and home loans remains at the level of the original home loan repayment schedule Delete Default Template Set Font Preferences Total LVR 81 29 Your total net cost per year Term remaining 17 7yr 43 770 43 046 43 311 43 301 41 679 This is literally the bottom line the reason for all the entries and calculations in the spreadsheet It shows the projected total net cost per year resulting from the investment and the repayment of your home loan Total Annual Net Cost dialog Clicking on a value in the projection columns displays the Total Annual Net Cost dialog showing the derivation of the values for the set projection Het investment cost 27 603 22 Ble Total Annual Net Cost Years Home loan payments 35 565 35 565 Home loan redraws Total net costs 12 5962 12 5953 PIA User Guide Page 93 PIA Version 7 320 Chapter 7 Menus and toolbars This chapter describes the functions of the pulldown menus and the toolbar at the top of the PIA screen File Edit Report Graphics Investor Calculator View Settings Help Delas oje ZE luaje etn lt lt fo re The chapter reviews the menus first from left to right then the toolbar Please note that not all menu items are pertinent to all spreadsheets Where individual items are not relevant and are made unavailable they will appear in the men
76. analyse the cash flows on an Ph one investment by another entity such as a Company self managed superannuation fund Emit SMSF or a company For example if the entity is a SMSF the entity s income would be that of contributions Work Related Income amp Deductions by a person or persons the tax scale would be that for a superannuation fund CGT rules would be different Salam ages EKON there would be no home loan or home repayments nor would there be any living expenses Other options Total Income that pertain specifically to a superannuation fund are given in the Allowable Deductions SMSF dialog Settings menu Work related Assessable Income Investor Other Income Work Related Income amp Deductions Other deductions These fields allow you to enter investor and partner income and deductions If this information has Tesi le ites icin 95 000 been entered elsewhere suchas via the Data Entry Check List see 2 4 m the Tax Credits dialog see 3 17 or the Current Taxable Income Dialog Ole os Eanes see next page it is shown here Total Deductions Clicking the Notes button opens the Investor Notes dialog You can use it for recording any additional notes you want to save with the file This dialog can also be accessed by clicking Add Notes in the Investor menu See next page PIA User Guide Page 105 PIA Version 7 320 Add Notes Clicking the Add Notes menu item o
77. and below Property value 400 000 424000 449440 476 406 535 290 716 339 Purchase costs 14 425 Investments 40 000 PIA User Guide Page 17 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 1 Year row John Doe for personal use only Investment Analysis Input Projections over 10 years End of year 2013 lyr 2yr 3yr 5yr 10yr Property value 400 000 424 000 449 440 476 406 535 290 716 339 The value in the input column on the spreadsheet shows the year of purchase The values in the projection columns display the projected value of the property in selected years from the time of purchase The maximum value is 40 years A value of zero displays no information displayed in that column The years do not need to be consecutive or even in chronological sequence but the year shown in the right most column determines the range of years over which PIA calculates the_ nternal Rate of Return see 3 19 Set Projections dialog Clicking on the Year row title opens the Set Projections dialog set Projections In the example the Investment Analysis spreadsheet shows a projection over 10 years so the Internal Rate of Return shown near the bottom of the input F pears column is the Internal Rate of Return calculated over 10 years ii pears To change the years displayed do any one of the following 15 pears Double click on the Year row title and select from the Set projection dialog 20 years Overwrite the year value in
78. anges from data entry to explaining in detail the derivation of spreadsheet variables Many dialogs provide spreadsheet like functionality in their own right e g Investment Capacity and Borrowing Capacity dialogs Reports The desired end product of analysis is often documentation of the results PIA provides a wide variety of standard and customised reports for this purpose These reports can be printed saved independently as Adobe Acrobat PDF files of the PIA file or even sent as email attachments also in Adobe Acrobat PDF format Acrobat PDF files require the free Adobe Acrobat reader available from www adobe com to be viewed Investment Analysis spreadsheet Chapter 3 The Investment Analysis spreadsheet allows you to evaluate any investment property As you know from the PIA Quick Start Guide you can go straight to an Investment Analysis by entering data via the Data Entry Check List Home Loan Analysis spreadsheet Chapter 4 The Home Loan Analysis spreadsheet is independent of the Investment Analysis spreadsheet and allows you to explore e Accelerated mortgage reduction such as additional payments fortnightly payments or using a credit line e Loan consolidation and refinancing You must make entries into these two spreadsheets before you can use the more advanced features of PIA Wealth Builder spreadsheet Chapter 5 Investment This provides an interface that integrates data on from the Investment Analysis spreadsheet th
79. apital Allowance depreciation calculation is based on PTS ei lee 300 000 P at n the value of the improvements at the Building costs 150 000 Total capital cost 150 000 time of purchase see document IR264 from www ird govt nz eaea Br anette TIGe feria e 250 In Australia it is calculated using the Vv erential Depreciation rate l straight line method only and is based Building costs as a pee see a ae Bin on the original construction cost of the of property price ODE Depreciation of building 3 750 building and the date on which construction commenced as Depreciation Method NZ described below In 2010 the NZ moved to remove this as a tax C Diminishing value Straight line 7 i T at deduction en i SE ANCE Capital Costs In order to provide reasonable defaults when creating a new property file by default the PIA assumes that the building costs are 50 of the specified property price You can change the building costs in the Building costs field to reflect the appropriate amount on which the capital allowance is based The Building costs as a of property price field is then updated and the link to property price is severed If the Link costs to property price check box is checked default the building costs change with any change to the property price using the percentage show in the Building costs as a of property price field If you do not want this link deselect the check box Capital Allowance Total cap
80. ash flow 40 000 18 134 17 645 17 137 16 059 12 963 The value in the input column of the Rental expenses row on the Investment Analysis spreadsheet represents the first year s rental expenses as a percentage of potential annual rent The values in the projection columns show the projected annual rental expenses These values are derived from the sum of normal recurring expenses and any special one off expenses Rental Expenses dialog Clicking on the Rental expenses row Rental Expenses title or the value in the Input column as TE opens the Rental Expenses dialog Normal Expenses Tt year ndice Normal Expenses 1st year Agent s Commission ee Annual Rent 15 268 This is an editable list of the individual Letting f see items that comprise the normal ee Expenses rent 20 286 expenses rates insurance A ates Net rent 10 677 maintenance etc for the first year of a see the investment aarp RAE Net wield 3 633 By default normal rental expenses om E are projected annually by the rate of Maintenance inflation specified in the Inflation Rate dialog discussed in 3 8 Expenses for individual years can also be specified directly by clicking the Annual amp Special Expenses button described below Body corporate Cleaning Pest control Advanced Annual amp Special Expenses Mowing lait Jit Other expenses Total 4 411 r OK Cancel Agent s Commission dialog Agent s commission can be
81. ash on cash return Rate of return if sold IRR and IRR which takes account of selling costs Your cost income per week Weekly costs with income in brackets Your income cost per week Weekly income with costs in brackets Weekly after tax cash flow After tax cash flow per week Monthly after tax cash flow After tax cash flow per month Annual cash surplus Annual cash surplus In a typical negatively geared investment Dyce ae the after tax cash flow is usually negative in the early years and in this situation you would normally specify the convention to be Display File Locations Magnification Colours Currency showing the Cost Income per Week with Investment Spreadsheet Bottom Line a negative cash flow shown as a positive 3 cost On the other hand if the properties Your cost income per week you analyse are more likely to be cash flow positive you might prefer to show income to be positive and any negative cash flows in brackets i e Income Cost per Week For an entity such as an SMSF it is often useful to display the Annual cash surplus to i Net present value Your income cost per week Real rate of retum Weekly aftertax cash flow Cash on cash retum Monthly aftertax cash flow monitor whether there is sufficient fund I Rate of retum f sold Annual cash surplus contributions being made by the investor s to cover any negative gearing l
82. assets being used as security for the loans As a general guide the LVR should not exceed 100 and preferably should not exceed 80 loans with LVRs above 80 are likely to attract mortgage insurance The DSR is a measure of your ability to service the loan It is calculated as a function of total debt repayments compared to total income including rental income Only a certain percentage of income is deemed eligible by lending institutions as a guide it is 30 of salary plus about 80 of gross rents and sometimes loan payments are deemed to be higher to allow for a potentially higher interest rate during the course of repayments Loan approval is unlikely for DSRs greater than 100 You can set the maximum LVR and DSR to be used for calculation of Borrowing Capacity in the Borrowing Capacity area of the dialog If either or both of these values is limiting the borrowing capacity it is they are shown in red In the example below Maximum DSR is the limiting factor so 100 is shown in red Clicking the calculated DSR or LVR field displays a window showing how the value is calculated Borrowing Capacity Calculator Annual Incomings MA A Annual Outgoing Source Income Eligible Income Repayments Deemed Payments 2 5 5 E 8 esto OME 300 18 000 Homeloan 24 426 100 0 24 426 Partner 25 O00 30 0 7 500 Other loans 0 100 03 0 Other of 1000 0 Credit cardlim 10 000 60 0 6 000 Gross rents no vacancy Investm
83. at the graphics look like Equity amp Investment Weekly Averages Tax Liabilities Investment Loan Payments Home Loan Payments Home amp Inv Loan Balances Combined Loan Value Ratios Home amp Inv Equity Wealth Builder Who Pays Clicking Who Pays generates and displays the Who Pays graphics report This shows a pie chart of the relative contributions of the tenant the taxman and yourself the investor towards the cost of your property in the first year Projections are also given for interest costs rental expenses total costs rental income tax credit and your contribution over a 25 year period The second page of the report includes a pie chart and bar graph showing the relative contributions of the tenant the taxman and yourself over the projected period Val ue amp D e bt Bo i Investment Property Value amp Debt Clicking Value amp Debt generates and displays the Investment Property Value and Debt graphics report with a graph of projected value and debt over 25 years The equity built up in the property is simply the difference between the value and debt and is shown Ta aaa clearly in the graphic A summary table lists the projected growth rate property value amount owing and equity over 25 years For an interest only loan the debt remains constant over time Fora ana principal amp interest loan the debt declines over time as the principal is gradually repaid ka E a a Year from purchase Value EE Deb
84. ate of Return is an example of a defined term If you get stuck First please read through PIA Quick Start Guide and this PIA User Guide Secondly use the online help You can access this from anywhere in the main part of the PIA program by pressing F1 or by accessing Help via the He p menu Tool tips are available for the icons in the toolbar of the spreadsheet and for the buttons in the Data Entry Check List These appear if you position the mouse pointer over the icon or button You can get context sensitive help by clicking on the button in most dialogs If all else fails you can obtain technical support by sending an email to support somersoft com au or calling the help line 07 3286 4368 The Help line will help you and you will help us by providing feedback This is an example of an Information paragraph These paragraphs contain additional could know information This is an example of a book reference It indicates a source of further information This is an example of a defined term Defined terms are hyperlinked clicking on them displays the glossary definition See 3 5 is an example of a cross reference in this case to Chapter 3 section 5 In order to reduce the size of the PIA User Guide detailed descriptions appear once only and are cross referenced in this way User feedback We welcome feedback from users both on the documentation and the software itself it helps us to give you what you want So p
85. atest property file you saved opening any previously saved file or creating a new property file If you are using PIA for the first time select the Create a new property file radio button and click on OK Open your latest property file This open opens the last property file you saved Open an existing property file This option opens a window displaying your property files Unless you have selected a different directory for saving your files they are saved in the default location of the PIA program directory See 7 1 for details of how to change the default directory Create a new property file This option creates a new file using the default settings you have chosen You can set these in the Data Entry Check List see 2 4 The Welcome screen also tells you which edition and version of the software you are using In this example it is the Personal Investor Version 7 507 The first two digits 7 5 represent the actual version number while the last two 01 represent the edition number Updates of the software are released from time to time and are available from the website www somersoft com au Welcome to Investor Version 7 501 Property Investment Analysis al somerset Financial Services ________B EEE Financial Services Copyright 1989 2013 Somerset Financial Services P O Box 615 Cleveland Qld 4163 Web site woww sommerso ft com au PIA User Guide Page 7 PIA Version 7 320 Chapter 2 The User I
86. ayment again As PIA uses a monthly time step for calculations the result is only a close approximation the interest saved by making the earlier payment of half the monthly amount is not taken into account PIA User Guide Page 58 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Extra mth yr 0 0 0 0 0 0 Irregular 0 0 0 0 0 Total repayments 35 565 35 565 35 565 35 565 35 565 You can enter irregular that is ad hoc unscheduled payments into the appropriate projections column by selecting the default value and overwriting it PIA assumes that the amount entered is to be paid into the loan account at the end of the year and recalculates the term remaining when you press the Enter key Irregular 0 0 0 0 0 Total repayments 35 565 35 565 35 565 35 565 35 565 Redraws This rows shows the sum of all the various repayments regular additional and irregular itemised in the Loan Consolidation dialog see 4 5 PIA User Guide Page 59 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet 4 11 Regular redraws row Redraws Regular mth yr 0 0 0 0 0 0 Irregular The value in the input column of the Regular redraws row shows the regular monthly withdrawals from the loan account loan The values in the projections columns show the equivalent annual amounts withdrawn in the specified years Technically they act as extra borrowings but in practise they are used as a means of budgeting for things such as normal living exp
87. benefits report based on current taxable incomes and current tax rates PIA User Guide Page 44 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 18 After tax cash flow row Tax credit single 65 000 9 929 10 165 9 392 8 323 6 850 After tax cash flow S40 000 8 205 7 480 7 745 7 736 6 113 Rate of return IRR 15 27 Your cost income per week The After tax cash flow row displays the monies that flow into or out of your pocket after tax is taken into account In most instances the figures simply represent the pre tax cash flows adjusted for any tax credits or tax payments The input column on the spreadsheet shows any cash flow at the time of purchase usually an initial cash deposit The projection columns show the annual projected after tax cash flows for the specified years Negative values shown in red in the spreadsheet represent investments made in the property while positive values shown in black represent cash dividends received as a result of the investment After tax Cash Flow dialog Clicking on the After tax cash flow row title or anywhere in the row itself opens the After tax Cash Flow dialog This shows how the after tax cash flows have been derived from the annual rental income less any outlays principal payments interest and other expenses Where appropriate the tax credits are then added resulting in the annual after tax cash flow The cost per week after tax cash flow divided by 52 is give
88. ber of investment properties until the Net surplus drops below zero Then decrease the number of properties by one Clicking the Full Report or Brief Report button generates an investment capacity report based on the number of properties entered under Investment properties under Capacity in this dialog Het surplus 4 273 Quarantine losses Total initial outlay 40 000 I Using the Investment properties field in the Investment Capacity dialog allows you to analyse the number of identical properties you could afford For a cash flow analysis report on a portfolio of different properties first create a portfolio and then choose the report option as described under Current Investment Portfolio above Maximise Wealth Builder This menu item is only available if the Wealth Builder spreadsheet is displayed Wealth Maximiser Clicking on this menu item opens the Wealth Maximiser dialog so that you can specify constraints for accumulating investment properties in the Wealth Builder spreadsheet When you click OK PIA calculates the maximum number of properties you will be able to havde letia ya dl ack semen on OO accumulate each year over a 40 year period and displays the results in the Wealth Builder spreadsheet E 100 00 Cash savings should not go below PIA User Guide Page 109 PIA Version 7 320 Chapter 7 Menus and toolbars Tax Variation report Clicking Tax variation generates and displays
89. ble income property purchased by investor in a single name Tax credit joint Calculation based on taxable income property purchased by two investors in joint names Tax credit super Calculation based on taxable income for a property purchased a super fund Tax credit company Calculation based on taxable income for a property purchased by a company For details see the description of the Tax Credits dialog below The value in the input column of the spreadsheet shows either the investor s marginal tax rate the investor s taxable income or the combined taxable income of the investor and partner The values in the projection columns show the projected tax credits in the specified years Tax Credits dialog Clicking on the Tax credit row title opens the Tax Credits dialog Tax Credit Calculation You can select the method Pa teats for calculating tax credits by TEN Le se selecting the Use marginal p Tax Credit Calculation Ownership ee C Use marginal rate Single name Propertional Ownership radio button g Marginal rate gives a quick Use taxable income Joint names Investor 100 00 approximation as it makes i WANA that all tax Tax Scale Australia Tax Benefits Partner 0 00 credits accrue at that rate of L tax Taxable income gives a Taxable Income Year a precise seas a G Investor Partner Total takes account of tax credits accruing in different tax Assessable Income 65000
90. changing values to examine What if scenarios with the software kj Ca The icon is dimmed if the option undo or redo is not available Spreadsheet icons Clicking on these icons take you to the various PIA spreadsheets E Takes you to the Investment Analysis spreadsheet see Chapter 3 A Takes you to the Home Loan Analysis spreadsheet see Chapter 4 K Link Takes you to the Linked loans spreadsheet see Chapter 6 Lut Takes you to the Wealth Builder spreadsheet see Chapter 5 Settings icons The settings icons allow you to make settings to determine how loans are calculated Lii Links loans Investment Analysis and Home Loan Analysis see Chapter 6 Ch Sets Credit line see Chapter 3 4 The Settings menu is described in detail in 7 7 Scroll icons The scroll icons in the Toolbar allow you to scroll through the years While PIA calculates hl a wl projections up to 40 years only 5 years are shown at any time By default these are the years 1 2 3 5 and 10 Status bar If displayed the status bar appears at the very bottom of the window You can switch display on and off in the View menu The left area of the status bar describes actions of menu items as you use the arrow keys to navigate through menus It also shows tips that describe the actions of toolbar buttons when you click on them before releasing them If after viewing the description of the toolbar button you choose not to execute the com
91. come row in the Current Taxable Income dialog see 7 4 PIA User Guide Joint Net Income Non Property Non Property Income Investor Salary wages 65 000 Other income 0 Total Income 65 000 Non Froperty Deductions Work related Other deduchons Total deductions Non Property Taxable Income Hon Property Net Income Hon taxable income 1 Total net income 65 000 Year Tyr Page 73 Partner 30 000 U 30 000 0 30 000 gt gt gt PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Other income 4 00 95 000 98 800 102 752 111 137 135 215 Total income 112 836 117 349 122 043 132 002 160 601 Rental expenses 4 00 5 621 5 846 6 080 6 576 8 001 The values in the projections columns in the Total income row show your projected total income for each year of the projection that is Rental income see 6 9 plus Joint net income see 6 10 Total income 112 836 117 349 122 043 132 002 160 601 Rental expenses 4 00 5 621 5 846 6 080 6 576 8 001 Living expenses 4 00 30 950 32 188 33 476 36 207 44 052 The Rental expenses row shows projected annual rental expenses The value in the input column shows the projected annual rate of increase for rental expenses from the point in time that they are indexed see 3 11 The values in the projections columns show the projected annual rental expenses for each year of the projection Annual amp Special Rental Expenses dialog Clicking on the Rental expenses
92. corresponding adjusted tax instalment per pay period The flat rate percentage is used by the Australian Tax Office to calculate adjusted tax instalments where regular payments might vary Clicking the Report button produces a report entitled Guide to Variation of PAYG Income Tax Withholding In Australia Section 15 15 of Schedule 1 of the Tax Administration Act 1953 provides that the commissioner may to meet the special circumstances of a particular case or class of cases vary the amount an entity is required to withhold In other words it is possible to vary your regular tax instalments in order to avoid an excessive end of year credit This used to be referred to as a variation of tax instalments for PAYE taxpayers under Section 221D but now is referred to by the ATO as Income Tax Withholding Variations for PAYG taxpayers In New Zealand people who receive wages or withholding payments may apply to Inland Revenue Department IRD for an IR 23 certificate It replaces the tax code declaration part of the IR 12 or IR 13 This certificate authorises the employer to make PAYE deductions using a specified code or deduct tax at a certain rate For more details see the New Zealand Inland Revenue Department s website at http www ird govt nz Expenditure associated with negatively geared rental property is a legitimate reason for variation of tax instalment PIA User Guide Page 110 PIA Version 7 320 Chapter 7 Menus and toolbars de
93. ct the calculated capital growth together with the value of any renovations undertaken in subsequent years The years shown in the Property Value dialog depend on the years currently displayed in the Investment Analysis spreadsheet as defined in the Set projections dialog described in 3 1 Holding costs These are the interest costs associated with the construction phase of the property before the property is available for rent As the PIA cash flows only begin from settlement holding costs may need to be specified and are assumed to occur at settlement Clicking on this button provides a template by which the holding costs can be calculated Furniture package A furniture package is often purchased as an optional addition for a resort or holiday unit so that it can be rented fully furnished Furniture is a depreciable item and the cost is taken into account when calculating the total loan required PIA User Guide Page 19 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet However for the purposes of the investment analysis furniture is not considered as part of the property value subject to capital growth The depreciated values of a furniture package are shown in the columns to the right of the initial value Stamp duty is not payable on the cost of furniture Property Details These fields allow you to enter the address of the property and a brief description This information is displayed in the various reports you can generat
94. culating tax credits makes the assumption that all Market value Property Value dialog The estimated current value of the property if sold PIA User Guide Page 137 PIA Version 7 320 Appendix A Glossary Negative gearing Purchasing an investment with borrowed funds where the interest on the loan exceeds the net rent from the investment Net cost per year Home Loan and Linked Loan spreadsheets In relation to the Home Loan the net cost is simply the cost of home loan payments less any redraws In the case of the Linked Loans the total net cost is the combined cost of home loan payments less any redraws plus the net cost of the Net Present Value NPV Internal Rate of return dialog This represents the increase in the investment equity in today s dollars In other words it represents the difference between the market value of the investment in today s dollars and it s total cost also in today s dollars Net rent Rental Income dialog Gross annual rent that is excluding vacancies less rental property expenses Net worth Wealth Builder spreadsheet The investor s net worth is the total value of all property assets including the family home less the total of all outstanding loans Net yield Rental Income dialog The annual rent less rental expenses expressed as a percentage of the property value See Rental expenses Non deductible expenses Expenses that are not tax deductible In PIA these are household l
95. d affordability Furthermore you can very easily test the sensitivity of your results i e playing What if by making changes to the variables like growth inflation and interest rates Finally you can print out a professionally structured report to help you present your investment proposal to your accountant or bank manager Disclaimer As the name suggests PIA is investment analysis software It is not accounting software It is intended for analysing and evaluating prospective property investments not for generating data for tax returns Also tax law varies from country to country and is constantly changing For this reason information given relating to tax law should be regarded as guidance only Where possible this User Guide indicates sources of further information Getting started This PIA User Guide assumes that you already have the PIA software up and running and that you are acquainted with the contents of the PIA Quick Start Guide and that you have worked through the example given there The PIA Quick Start Guide helps first time users get started with PIA guiding you through installing your software Starting it and entering your first set of data Structure of the book This User Guide is a reference work The structure is based on the software itself Chapter 1 Welcome to PIA Introduction to PIA and conventions used Chapter 2 User Interface Description of features and how to use them Chapter 3 Investment Analysis
96. d are the home and investment interest and payments These figures are used to calculate the total loan balances for the ends of each year which are shown broken down into home loan investment loan components from the property in the Investment Analysis spreadsheet see 3 10 and any existing portfolio loans Credit line If you check the Use credit line to repay loans check box PIA recalculates the loan payments and balances when all surplus cash is used to help repay the loan principal This is equivalent to clicking CL in the toolbar for this spreadsheet Total Loans Oo Myy gt Start of Year Initial Tyr ly WT Br 10yr Investment properties Home loan 336 000 336 000 326 404 31r 230 295 215 222 057 Investment loans 379 356 379 356 379 356 379 356 379 356 Total loan balance 715 356 706 345 696 566 674 571 601 412 Home interest 26 554 25 606 24 996 23 169 17 097 Home payments 35 565 35 565 35 565 35 565 35 565 Investment interest 30 345 30 345 30 345 30 345 30 345 Investment payments 30 348 30 348 30 348 30 348 30 348 End of Year Home loan balance 336 000 326 989 317 230 306 661 202 019 203 508 Investment loan A Fis cal 379 396 3r9 396 Of dd 379 396 Investment loan B 0 0 0 0 0 Portfolio loans 0 0 0 0 0 0 T otal loan balance 336 000 706 345 696 5686 686 017 662 175 582 944 Use credit line to repay loans PIA User Guide Page 69 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Total of all loan
97. dialog Clicking on the Loan costs row title or anywhere in the Loan costs row opens the Loan Costs dialog Cost components Loan costs are made up of several components some of which are a function of the size of the loan while others may be a flat fee Loan costs vary between institutions but as a general guide expect total loan costs to be between 1 to 2 of the total loan including costs If loan costs are paid at the time of purchase this reduces the size of the loan and in turn the overall loan costs If you enter a dollar amount in the Cost column the Flat fee tick appears It disappears if you enter a percentage in the column of Loan In practice the first three items tend to be percentages the remainder tend to be flat fees Total costs shows the total costs as a percentage of the total loan and as a dollar amount Total loan including costs shows the total loan with the costs added Here the various cost components can either be entered directly as a flat fee or as a of the loan Loan cost write off period Enter the appropriate figure into the Loan cost write off period field In Australia these loan costs can be written off over 5 years or the term of the loan whichever is the lesser In New Zealand loan costs are considered a revenue cost and can be written off in the year they are incurred PIA User Guide Loan Costs Cost Component Z of Loan Establishment fees Mortgagee stamp duty Mortg
98. dialog If the checkbox is unticked the total loan amount is the sum of the loan amounts for the two loans See http www somersoft com au split_rate_loan htm for an example Capitalised Interest The financial model in PIA assumes that the additional interest on the increased loan balance that is the interest on the capitalised interest is not tax deductible This default can be changed by ticking the Capitalised component tax deductible check box at the bottom of the dialog You should check with your accountant to see if this is the case in your situation For further details of the uses of the Loan Interest amp Type dialog see 3 10 Note that the most common use of a credit line is in accelerated mortgage reduction and this is usually in relation to a non deductible home loan rather than a tax deductible investment loan Where an investment loan and a home loan are part of the same credit line it is more effective and usually more accurate in practice to make the investment loan interest only and the home loan a line of credit PIA User Guide Page 27 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 6 Equity row Loan amount 379 356 379 356 379 356 379 356 379 356 379 356 Equity 20 644 44 644 70 084 97 051 155 935 336 983 Capital growth rate 6 00 6 00 6 00 6 00 6 00 6 00 The value in the input column on the spreadsheet shows equity at the time of purchase The equity in each year is the difference between th
99. ductions If the Investor type chosen is not a person the field names will reflect the entity chosen Taw atiseks Hon cash deductions Assessable income Taxable Income Het Cash Income Hon taxable income Mon cash deductions Total Het Income m Income Proyections MW Auto indexed from year PIA User Guide Page 106 J ad Ti cn mm mm atl So H til 30 000 35 000 0 95 000 95 000 yr atarate of 4 00 Year Tyr 5 F Cancel PIA Version 7 320 Chapter 7 Menus and toolbars Current Investment Portfolio Clicking Current Investment Portfolio opens the Current Investment Portfolio dialog This dialog allows you to create a new property portfolio or to view your current portfolio If you create a new portfolio the information is used to adjust your taxable income in the Investment Analysis spreadsheet and the entire portfolio data is added to the Wealth Builder spreadsheet For more on portfolios see Why create a portfolio on the next page gt The property investment portfolio only covers Properties alibi dy 1 2004 340000 74 Laybur Road Cleveland Gd 4163 joint owner eee 2 2005 300000 Property under review sole owner principal place of residence separate from investment properties Current Investment Portfolio Tear 2 005 2006 2007 2008 2010 2015 Properties 2 2 2 2 2 fa Value 640 000 Er 200 706 036 f4 592 olg 2
100. ductions qualifying under the category of Allowable Deductions This facility calculates the appropriate variation in regular tax instalments for an investor taking into account the period over which the property is rented and the date on which the adjustment is to be made PIA calculates the apportionment of rent and rental deductions based on the purchase date specified If these figures are overwritten the next time you return to the dialog PIA will ask whether you want the variables re apportioned according to the dates PIAFPU A Reapportion variables over the part year ae PIA User Guide Page 111 PIA Version 7 320 Assets amp Liabilities Clicking Assets amp Liabilities opens the Assets amp Liabilities dialog The dialog acts as a template for a net worth report that is in a format required by most financial institutions when applying for an investment loan Lenders use this information to determine whether you have sufficient collateral for the loan They do this by calculating a Loan Value Ratio LVR However not all assets may be used as collateral and each item in the template has an associated LVR checkbox for specifying whether it should be included in the LVR calculation For example cars and boats are assets but are not usually able to be used as collateral for investment loans Income amp Expenses Clicking Income amp Expenses opens the Income amp Expenses dialog The dialog acts as a template for a ne
101. e Depreciation of Fittings Chattels Investment Analysis spreadsheet These are the amounts by which the value of fittings decreases over time For tax purposes this can be either a constant amount straight line or prime cost method or a constant percentage of the written down value diminishing value method Depreciation on Building Investment Analysis spreadsheet These are the amounts by which the value of the building decreases over time See Capital allowance Eligible income Debt Service Ratio dialog Eligible income is that part of gross income that a financial institution will accept as disposable This could be 30 of wages or salary the remainder being required for paying tax and living expenses and 80 of rental income Equity Investment Analysis spreadsheet The equity in each year is the difference between the property value and the loan Ex home loan payments Linked Loan spreadsheet Under the Wes a model in aks the spinal hame loan payments ex home payments may be diverted to Exit ini di Stamp duty payable on the sale of a property by the vendor Fittings Items which are attached to a property but which can be removed without damaging the property See also Depreciation of fittings chattels Fixtures Items which are attached to a property and which cannot be removed without damaging the property Furniture package Property Value dialog A furniture package is often purchased as an option
102. e see Report menu in Chapter 7 Linked values To make it quick and easy you to analyse potential property investments three input variables are by default linked to changes in the property value Value of fittings By default if the property price changes the total value of fittings is reset to a set percentage 6 of the property price and individual items are consolidated into two categories General fittings and Low value pool If you choose to sever this link they must be set manually in the Depreciation of Fittings dialog described in 3 14 Construction cost By default if the property price changes the original construction cost of the building is reset to 50 of the property price and building depreciation calculated accordingly If you choose to sever this link it must be set manually in the Depreciation of Building dialog described in 3 13 Stamp duty By default if the property price changes the stamp duty is recalculated from the currently selected stamp duty scale See Specify Stamp Duty Scale dialog in 3 3 Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous five years Annual Growth Rates button Clicking on the Annual Growth Rates button displays the Investment Property Growth dialog shown below To simulate an investment property that is to be built you can either specify the land cost as the property price attracting Stamp
103. e account and living expenses are redrawn from that account When you select a credit line the following occurs e The input column of this row is blank an extra monthly payment is not applicable under a credit line e PIA calculates the annual values in the projection columns based on your total after tax income less the regular payments e The row title changes from Extra mth yr to Extra credit line e The projected living expenses appear as redraws until the loan is repaid You may select Credit Line under the Settings menu on the spreadsheet or the Credit line toolbar icon see 7 7 Extra Payments dialog Clicking on the Extra mth yr row title or on a value in a projections columns opens the Extra Payments dialog You can enter extra Extra Payments regular payments here Credit line Credit Line A Credit line means that all salary and wages are paid directly into the loan and living expenses are taken out as redraws see below This can speed repayment for the following reasons You have to draw the money to spend it Instead of paying in what Regular Payments Use all available cash for payments you can afford you take out what you need Regular monthly payment 2036 The Credit Line encourages you to draw up a budget which i aha increases awareness of spending behaviour Extra monthly payment E If you have a loan and a current or savings account surplus cash Total monthly payments x036 earns
104. e investment property under review the Home Loan Analysis spreadsheet your home mortgage and any existing property portfolio Portfolio Analysis Current Jwi The spreadsheet allows you to interactively build a portfolio of portfolio properties based on projected multiples of the investment property under review At each step that is each year you can see whether you would have the necessary funds cash savings and whether the banks would be likely to lend you the finance loan value ratio and debt service ratio property Wealth Builder Linked loans spreadsheet Chapter 6 Investment This spreadsheet provides an interface for exploring methods of accelerated mortgage reduction where there are both investment and home loans and any cash flow surplus from the investment can be used to help repay the home loan loan If a credit line has been used as a means of reducing a home loan the Linked loans model allows account to be taken of servicing commitments for any investment loan Linked loan PIA User Guide Page 2 PIA Version 7 320 Chapter 1 Welcome to PIA Use the Contents at the front of the book to guide you to broader areas of interest such as spreadsheets menus or scenarios f you need information on a specific row dialog or field check the index at the back of the book See the glossary in Appendix B for definitions of terms Defined terms are hyperlinked in the document Internal R
105. e investor and partner and their total committed expenditure living expenses other mortgage payments and tax liabilities Any surplus funds are used as additional repayments of the principal The Credit Line option can be selected independently in each spreadsheet In those spreadsheets where there is both a home loan and an investment loan Linked Loans and Wealth Builder repayments on the investment loan are restricted to interest only until the home loan is completely repaid Cl This option can also be selected by clicking the Credit Line icon on the toolbar see 5 10 Link Home amp Investment Loans Clicking Link Home and Investment in the Settings menu opens the Linked Loans spreadsheet if it is not already opened and then links your investment loan and your home loan When the loans are linked any cash flow surplus from the investment property is used to repay any debt on the home loan This is fully described in Chapter 6 This option can also be selected by clicking the Investment amp Home Loans icon in the toolbar Link Options Clicking Link Options in the Settings menu opens the Link Options dialog box This is only enabled when the Linked Loan Spreadsheet is displayed The dialog provides options for specifying various forms that the linked Loan model can take e g by using all available cash to repay the home loan and then switching to use all available cash to repay the investment loan There are options for capitalis
106. e property value and the loan It is not an input variable as PIA calculates the difference between the property market value and the loan Equity increases in line with the increasing value of the property and in the case of a principal amp interest loan with decreasing debt If the property is sold not recommended in the short term selling costs sales commission and solicitor s fees and Capital Gains Tax must be deducted to establish equity The values in the projection columns show the anticipated equity for the projected years displayed Equity dialog Clicking on the Equity row title or on any cell in the row opens the Equity dialog This shows property value outstanding loan and the equity after 5 and 10 year periods It also shows projected selling costs sales commission solicitor s fees etc exit stamp duty where applicable capital gains tax where appropriate and the corresponding after sale equity if the property is sold at the projected market value If all the monies are borrowed the initial equity is likely to be negative as the total cost of a property acquisition includes purchase and loan costs in addition to the cost of the property itself Equity increases with the increasing market value of the property and with any decrease in the debt for example in the case of a principal amp interest loan Detailed Capital Gains Tax CGT calculations for the property are show in more detail in the Capital Gains Tax
107. ear ritial Total value 480 000 432 00 S605 765 1 045m 1 1773 1 576m Total laars 336 000 706 345 696 566 E96 017 62 175 goz 44 Cash 40 000 4 411 10 954 18 72 38 909 113 483 Met worth 184 000 230 866 303 136 380 798 554 373 1 113m In today s 184 000 221 987 200 266 339 529 455 654 rateg Today s dollars Because of inflation a future dollar will be worth less than a dollar today In the row marked In today s PIA shows the value of the net worth in today s dollars allowing direct comparison If you have specified that a credit line be used any cash surplus shown in the spreadsheet is taken off the loan amount before it is shown Where no credit line is used the cash surplus is simply added to the bottom line PIA User Guide Page 82 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Net worth _ 230 866 303 136 380 798 554 373 1 113m Investment equity 15 27 44 644 70 084 97 051 155 935 336 983 The investment equity is the difference between the total value of investment properties and the debt remaining on them The value in the input column of the Investment equity row reflects the Internal Rate of Return for your investments over the range of annual projections selected The values in the projections columns reflect the projected investment equity in each of the selected years Investment Equity dialog Clicking on the Investment equity row title or on any of the projections columns opens the Inve
108. ecause the net rent exceeds the loan repayments can be used to help repay non deductible loans such as the home loan Licensee The person or company in the case of the Professional version to whom a copy of the PIA software is licensed The nominated licensee is provided with a registration code When these are entered into the Registration dialog the software switches from demonstration mode to full mode Linked loan Linked Loan spreadsheet The term linked loan describes the situation whereby the repayment schedule for one loan home loan is dependent of the repayment schedule of another loan investment loan A cash flow surplus from an investment property could be used to make extra repayments on a home loan Living expenses Living Expenses dialog Annual living expenses required by the investor and partner to cover cost of living ranging from home loan repayments to groceries holidays medical and school bills Loan amount Loan Amount dialog The total of all costs property price purchase costs loan costs etc less any initial outlays If renovations were carried out immediately the loan would account for these costs as well Additional loans may also be sought for items such as furniture or to help supplement initial cash flows Loan cost write off period Loan Costs dialog The number of years over which loan cost can be written off for tax purposes In Australia the Loan cost write off period is 5 years or the term
109. ed and sales commission is negotiable Capital Gains Tax Calculator Selling price Commission Clicking Capital Gains Tax opens the Capital Gains Tax Calculator The menu item is disabled if you have previously specified capital gains tax CGT to be inapplicable e g as in New Zealand See the Capital Gains Tax item under the Settings menu in 7 7 Otherwise the form of the calculator reflects the CGT option chosen Capital Gains Tax Calculator Discount Method This calculator shows how the capital gains tax on a property is calculated using the Australian tax rules announced in September 1999 which were based on the recommendations of the Ralph review of the tax system Under this regime indexation and averaging of the earlier system are no longer used Instead the tax liability is based on a discount rate usually 50 of the capital gain For capital gains tax purposes any furniture fixtures and fittings should be treated separately from the property They should be subtracted from the purchase price and their written down value should be subtracted from the sale price The Australian Government legislated that after May 13 1997 building depreciation claims should be written back and subtracted from the cost base PIA User Guide Capital Gains Tax Calculator Discount Method At Purchase Purchase price Purchase costs Fixtures amp fittings Acquisition costs At Sale Sale price
110. eflected in the Capital growth rate row of the spreadsheet and in the Capital growth rate dialog If you change the growth rate in a year of the Investment Property Growth rate dialog subsequent years are changed to the same rate Note that the spreadsheet cells do not behave in this way a change to an annual rate does not effect subsequent years Entering a value into a Growth rates field resets all fields to this growth rate including any individual property values entered into the Property value row of the Investment Analysis spreadsheet The years shown in the Capital Growth Rate dialog depend on the years currently displayed in the Investment Analysis spreadsheet as defined in the Projections Displayed dialog described in 3 1 Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous five years Investment Property Growth End of year Average Tyr yr dyr gyr 10r Property value 300 000 313 500 327 608 342 350 373 855 465 891 Growth rates 4504 4 File 4 504 4 50 4 50 4 50 F 4 gt OK Cancel PIA User Guide Page 29 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 8 Inflation rate CPI row Capital growth rate 6 00 6 00 6 00 6 00 6 00 6 00 Inflation rate CPI 4 00 4 00 4 00 4 00 4 00 4 00 Gross rent week 350 17 836 18 549 19 291 20 866 25 386 The value in the input column on the spread
111. elect the next next five previous or previous five years Advanced options Clicking Advanced in the Rental Income dialog opens the Advanced Options dialog Advanced Options dialog This allows you to control the underlying financial model by redirecting income and expenditure to or from the cash flows or the loan amount Normally all income rents and tax credits and expenditure interest payments rental expenses are accounted for in the cash flows associated with the investment However it may sometimes be useful to examine the implications of modifying these defaults For example in the case where a property is cash flow positive you may wish to use the rental income or tax credits to make additional loan payments and reduce debt Another example might be where you wish to internalise the investment that is having all income paid into the loan and all expenditure added to the loan Advanced Options ltem Cash Flow Loan Rental income Add to cash flow C Decrease loan Tas credits Add to cash flow C Decrease loan Loan interest Decrease cash flow C Add to loan Property expenses Decrease cash flow C Add to loan Cancel PIA User Guide Page 32 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 10 Interest row Cash deductions Interest 1 0 8 00 30 348 30 348 30 348 30 348 30 348 Rental expenses 30 89 5 621 5 846 6 080 6 576 8 001 In the Investment Analysis spreadsheet the nterest row shows the type of l
112. en directly Negative cells contain negative values and may be either active or inactive By default spreadsheet cells that can be selected and changed active cells are coloured blue Other cells inactive cells are coloured black except where their value is negative in which case they are red Chapter 7 Menus and toolbars Preferences Display File Locations Ma qnificatior Colours lew rrency Background Colours Tet Cell Colours Graphics Colours Spreadsheet Active Upper Sheet Inactive Lower Sheet Negatives Defaults Graphics colours refer to the different components in graphics reports see 7 3 These are denoted by the You Tenant and Taxman buttons the components for which appear in the Who Pays graphic report Currency Tab This tab provides options for using currency symbols other than the It has been provided mainly for British or European users of the software PIA User Guide Custom colors BEEE aan sf ite et i i a Define Custom Colors gt gt Cancel Page 131 PIA Version 7 320 7 9 Help menu Clicking Help in the menu bar displays the Help menu Chapter 7 Menus and toolbars Help Topics The Help menu gives you access to a variety of help options It also includes registration feedback and on line support options Help Topics Register Feedback Support On line About PLA Clicking Help Topics opens the PIA Help Topics facility Help can be obtained by using either
113. enses and counterbalance any extra repayments specified above see 4 8 Under a credit line all after tax income is channelled into the mortgage account and living expenses are redrawn from that account When you select a credit line the following occurs e The input column of this row is blank a fixed regular monthly redraw is not applicable under a credit line e The projected living expenses appear as redraws until such time as the loan is repaid e The row title changes from Regular mth yr to Regular living exp e The Extra repayments row shows your total after tax income less the regular payments see 4 8 For regular monthly redraws enter the value into the input column in the Regular row PIA then shows the annual redraws in the projections columns of the row For irregular that is ad hoc unscheduled redraws enter the value directly into the spreadsheet in the year in which the redraw is made Annual Living Expenses dialog Clicking anywhere in the row when a credit line has been selected opens the Annual Living Expenses dialog Here you can specify the total annual living expenses in any year or specify the rate at Annual Living Expenses which these might change with time Your living expenses for the first year can be me a i T uae entered via the Annual Living Expenses ear Tyr 2yr Ayr Spr 10yr Budget dialog For further details see Living Expenses under the Investor menu Arnualexperces REEL 29 52
114. ent properties Property 1 15 600 80 072 12 460 Property 1 15 583 100 0 15 953 Property 2 16 141 90 0 12913 Property 2 FEEF 100 02 2 557 Total 11674 20 893 Total 6 dob 52 966 Debt service ratio 104 0724 Assets amp Liabilities gt Borrowing Capacity Asset Value Loan balance Equity Gross weld 2 5 00 Home 360 000 252 000 106 000 Eligible rent 50 002 Other 0 T o Loan payments 70 o piz Property Hl 300 000 205 465 14 531 Additional casts 2 3 00 Property 2 E O Maimun LA io Os Tota 660 000 537 469 Maxirnum DSA 100 003 Loan value ratio 41 4324 Value of properties T Cash Savings 0 122 531 Borrowing capacity 0 Defaults Report Loan Calculator OF Cancel PIA User Guide Page 117 PIA Version 7 320 Loan Payments Calculator Clicking Loan Payments opens the Loan Payments Calculator This calculator enables you to select whether the loan type is Principal amp Interest or Interest Only To select either of these options click the appropriate radio button in the Loan Type area You may also enter details of the loan amount interests rate payments per year term of loan etc Changing the periodic payment or payments per year recalculates the term of the loan When calculating the term of the loan switching from monthly payments to fortnightly it is assumed that the loan payment is halved Likewise weekly is 1
115. entered as a figure or as a percentage To enter a percentage click on Agent s Commission to display the Agent s Commission dialog Agents commission including GST Rate Agent s commission o 25A Cancel Annual Rent The Annual rent shows the actual annual gross rent potential annual rent less vacancies Expenses rent shows rental expenses as a percentage of the potential annual rent i e assuming no vacancies Net rent is actual annual rent i e excluding vacancies less rental expenses Net yield shows the annual net rent as a percentage of the property value Clicking Annual Rent displays the Rental Income dialog discussed in 3 9 Advanced Clicking Advanced in the Rental Expenses dialog displays the Advanced Options dialog discussed in 3 9 PIA User Guide Page 35 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Annual and Special Expenses Clicking on Annual and Special Expenses in the Rental Expenses dialog opens the Annual and Special Expenses dialog Annual and Special Expenses dialog This dialog allows the entry of any special expenses incurred from time to time that are best treated separately from normal indexed rental expenses Such expenses are most commonly incurred in the first year as one off expenses for example quantity surveyor costs for assessing depreciable items By default the normal annual expenses are indexed by the rate of inflation If the expenses are changed
116. ents and redraws for each year By default these are simply the regular scheduled loan repayments and remain constant until the loan is repaid However where you use a Credit line or where ever extra payments and or redraws are specified these indicate the total net cost Negative values are shown in red with a minus sign A negative net cost indicates that redraws exceed repayments so the loan is increasing PIA displays a warning message if you enter a value that creates this situation PIA User Guide Page 64 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet This chapter provides an overview of the Wealth Builder spreadsheet and its related dialogs The term wealth builder refers to the main application of this spreadsheet which is to provide an interactive analysis of each step in accumulating a portfolio of investment properties building wealth The Wealth Builder spreadsheet helps you to address the question When can take the next step and buy another investment property The answer is when you can afford to and or when a bank would lend you the money both of which are indicated in the spreadsheet This spreadsheet draws together the information from both the Investment Analysis spreadsheet Chapter 3 and the Home Loan Analysis spreadsheet Chapter 4 to give a more holistic guide to building wealth through a portfolio of investment properties You simply need to specify the total number of investment propertie
117. ents dialog Clicking on the New tax row title opens the New Tax Payments dialog New Tax Payments This shows the derivation of the new tax that will need to Year Tyr be paid Current taxable mcome Current tas Rental income Total income Rental deductions Mew taxable income New tax investor Mew tas partner Mew tas lability PIA User Guide 35 000 15 869 17 036 112 036 45 806 E7020 3 693 ed 5 940 Page 77 em 95 800 17 024 15 549 117 349 draag fO 126 4366 2 443 6 559 SY 102 792 18 199 19 291 122 045 45 902 T142 6 055 2 40 owl yr W113 20 693 20 866 132 002 44 06 Of ado 3 078 Bede 12 370 PIA Version 7 320 10yr 135 215 29 271 25 386 160 601 43 576 116 725 16 716 5 705 22 421 Chapter 5 Wealth Builder spreadsheet New tax 11 451 11 698 12 606 14 117 eel Loan payments 44 409 44 409 44 409 44 409 44 409 Total expenditure 89 222 90 136 91 724 94 637 101 990 The values in the projections columns of the Loan payments row show the total amount of loan payments home and investment loans for the selected years Loan Interest amp Type dialog Clicking on the row title or on any of the values in the projections columns opens the Loan Interest amp Type dialog allowing you to specify the interest rates and type of investment loan see 3 5 To see the derivation of the total loan payments click on the Total of all loans row of the spreadsheet t
118. er Guide Page 43 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Taxable Income Projections By default taxable income for the first year is used to project taxable income for later years by indexing at the inflation rate entered in the Inflation Rate dialog described in 3 8 If the Inflation indexed check box is not checked it means that changing a taxable income in any year has no effect on the taxable income in other years Note that it does not imply that taxable income remains constant from one year to another If the Inflation indexed check box is checked and you enter a value for a particular year subsequent years are still automatically indexed at the rate indicated If you make a manual change to the taxable income in a later year that year appears as the base year for any further automatic indexing Advanced Clicking Advanced opens the Advanced Options dialog described in 3 9 Tax Benefits dialog Clicking on items in the Tax Credits row opens the Tax Benefits dialog Property ownership Fane Ponce You can enter the relative shares of investor and partner in the property ownership Property ownership 100 00 000 100 004 Number i in the Property ownership row Current taxable income 65 000 30 000 95 000 STG Selecting the Single Name radio button in Rental income 17 636 oO 17 536 the Property Total income 02 036 112 536 ownership area gives 100 ownership to the Rental deductions 45 806 45
119. er September 21 1999 depreciation be defined in terms of effective life rather than a specified rate of depreciation Under these rules the rate at which items are written off is equal to 150 called the Diminishing Value Rate divided by the years of effective life This legislation also introduced a low value pool for items under 1000 These items are to be written off using the diminishing value method at a rate of 37 5 effective life of 4 years but at only half this rate 18 75 in the year of acquisition For items acquired after May 9 2006 the diminishing value rates were increased from 150 to 200 of the prime rate For example an item with an expected life of 4 years is now written off at the rate of 50 per year rather than 37 5 This change does not apply to the low value pool For details of depreciation rules in Australia and New Zealand please see the references at the end of the previous section PIA User Guide Page 40 PIA Version 7 320 3 15 Loan costs row 24 000 4 931 Deprec of fittings Loan costs Total deductions Chapter 3 Investment Analysis spreadsheet 3 850 5 043 3 487 1 795 526 986 986 986 986 45 806 47 224 45 902 44 706 43 876 The value in the input column of the Loan costs row title shows the total costs associated with financing the investment property The amounts shown in the projection columns represent the amounts written off for tax purposes in the years specified Loan Costs
120. es into a horizontal double headed arrow Drag the border to desired position Height Point to the top or bottom window border the pointer changes into a vertical double headed arrow Drag the border to desired position Height amp width Point to any window corner the pointer changes to a diagonal double headed arrow Drag the corner to the desired position For full details refer to Microsoft Windows online help PIA User Guide Page 16 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet This chapter provides you with a guided tour of the Investment Analysis spreadsheet and its related dialogs When you have completed the data entry check list for a particular property see 2 4 you will spend most of your time here in this spreadsheet This spreadsheet allows you to analyse and evaluate prospective property investments It does this by calculating the after tax cash flows for the investment and from those cash flows calculating the nternal Rate of Return The spreadsheet lists the key input variables that describe the property under review the way in which it is financed the investor s current taxable income and rate variables on which forward projections are based It shows both current data and the projections based on that data This spreadsheet thus allows you to quickly examine a range of What if scenarios simply by modifying the input variables Where you have not made any changes projections are based on
121. for any specific year indexing is applied forward from that year The values for previous years remain unchanged but can be edited Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous five years Annual amp Special Rental Expenses Year dur 2yr Ar Byr 10yr eee ees a asa ara S272 Special expenses 0 0 o o 0 Totalespenses 4 411 4499 4589 A775 5272 Projecting Normal Expenses I Inflation indexed from year Tur atarate of 200z PIA User Guide Page 36 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 12 Pre tax cash flow row Rental expenses 30 89 5 621 5 846 6 080 6 576 8 001 Pre tax cash flow 540 000 18 134 17 645 17 137 16 059 12 963 Non cash deductions Pre tax cash flow is the sum of all the monies that flow into and or out of your pocket before tax is taken into account In most cases this represents gross rent less interest expenses and any payments toward the principal If you enter initial investments in the Investments dialog these are reflected in the input column of the Pre tax cash flow row The projection columns show the projected pre tax cash flow in selected years Interest and expenses are not included in the cash flow if they are capitalised in the loan Likewise rents are not included if they are used to directly reduce the loan Pre tax Cash Flow dialog Clicking on the Pre tax cash fl
122. g at the bottom of the Linked loans spreadsheet If the investment and home loans not linked Independent loans the Term remaining in the Linked Loans spreadsheet will be identical to that of the Home Loan Analysis spreadsheet Once the loans are linked Linked loans the cash flow surplus or cash flow commitments for the investment loan will also be taken into account net repayments will be set to those possible under the home loan analysis and the Term remaining will be adjusted accordingly No changes are made to the investment loan repayment scheme unless there surplus cash flows are available to assist in repaying the home loan In the latter case the ex home loan payments will be used to help repay the investment loan once the home loan is repaid If you choose to use a Credit line from within the Linked loans spreadsheet you are choosing a subtle change to the model described above In this case the credit line is used to repay the home loan and once it is repaid automatically reapplied to repayment of the investment loan Link Options dialog The model has been made easier to follow and more flexible by providing a Link option dialog accessible under the Settings menu Link Options Options available when home and investments loans are linked Home Loan Repayments Regular monthly payments 2 964 M Use all other available cash credit line M Use any surplus investment property cash flow Linked loans Capitalise i
123. h or year shows Annual vacancy rate eUl Per year the potential rent for the specified period The Potential annual rent represents the corresponding annual rent for example the weekly rent multiplied by 52 The Annual vacancy rate is the anticipated percentage of time that the property is vacant Holiday Letting 1st Year and not generating income Actual annual rent 15 200 Holiday letting Grogs yield 5 104 C Grozs yield Season Weeks Rent wk Occupancy rate Total rent The Actual annual rent is the anticipated rent Peale per year potential annual rent less vacancies Shoulder The Gross yield is calculated by PIA as the actual annual rent expressed as percentage of the property value Totals Dif season Holiday Letting If you have a property where the rents change seasonally for example a holiday Advanced Annual Hent Cancel unit click on the Holiday letting radio button Preferences to enable the Holiday Letting part of the Rental Income dialog Here you can enter the duration number of weeks rent per week and the anticipated occupancy rate for each of the three seasons peak shoulder and off season The figures in the top half of the dialog change to reflect the entries you make The Gross yield is calculated by PIA as the actual annual rent expressed as percentage of the property value The Net yield is calculated as the net rental income actual annual rent less rental expenses expressed as
124. he Home Loan Analysis spreadsheet PIA uses the New monthly payment to recalculate the remaining term of the loan for the Total amount owing and the interest rates specified on the spreadsheet If the repayment is less than the interest the loan would never be repaid and the term remaining is undefined that is it shows as PIA User Guide Page 55 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Amount owing 336 000 Refinance costs SO Repayments The value in the input column of the Refinance costs row is zero if there is no refinancing involved otherwise the value is the sum of the individual components that make up the cost of refinancing e g establishment fees mortgagee stamp duty etc This amount is added to the Amount owing to give the current Loan balance Home Loan Refinance Costs dialog Clicking anywhere in the row opens the Home Loan Refinance Costs dialog This can also be accessed via the Set Refinance Costs button in the Loan Consolidation dialog see 4 5 Here you may override the PIA defaults and specify the various loan cost components and their values Cost components Loan costs are made up of several components some of which are a percentage of the size of the loan while others may be a flat fee If you enter a dollar amount in the Cost column the Flat fee tick appears It disappears if you enter a percentage in the column of Loan In practice only the first three items tend to be percent
125. he investment The summary report shows the property value growth rate rental income rental expenses gross yield and net yield over 25 years Bank Comparison Clicking Bank Comparison displays the Bank Comparison dialog This allows you to specify an interest rate to generate a report comparing the return from a bank deposit with the return from your investment property Enter the desired interest rate and click OK PIA generates and displays a comparative graphic report showing projected returns from equivalent investments in cash and property over 25 years The summary report shows after tax cash flow cash invested total cash and interest property income income and interest property equity and equity and income projections over 25 years Cash investments are regarded as equivalent to any negative after tax cash flows i e contributions by the investor for the property being analysed Cash accumulated over time is calculated from the specified interest rate less any tax liability which is calculated at the investor s marginal tax rate The wealth accumulated in the property is the equity at any point in time plus any positive after tax cash flows accumulated at the same interest rate and taxed at the same marginal rate as for the cash investment The Cash Invested column of the table shows cash investments made in both the property and as investments in the interest bearing savings account term deposit or similar Equity
126. he key results from the Linked loans spreadsheet are the remaining time it will take to repay the home loan and the total annual net cost of doing so both of which are given at the bottom of the spreadsheet and are recalculated automatically whenever a change is made to any of the relevant variables This chapter also describes the difference between independent and linked loans as well as the impact of capitalising interest and capitalising expenses What are independent and linked loans By default the Linked Loans spreadsheet simply shows a summary of the variables from the Investment Analysis and Home Loan Analysis spreadsheets with no interaction between the two sets of variables In this case Independent loans appears at the top left of the spreadsheet indicating that the loans are not yet linked in any way If you choose to link the loans as described below Linked loans appears at the top left of the spreadsheet Any surplus cash flow from the investment property is now automatically channelled into home loan repayments until the home loan is paid out after which the normal home loan payments called ex home payments are diverted to the investment loan until it too is repaid If the home loan is repaid before the investment property generates any surplus cash flow no continuation of ex home loan payments is used to toward investment loan repayments When the Linked Loans setting is selected a Linked loans report is available in the Report
127. he spreadsheet The Investments row title changes to Investments principal and the Interest row title changes to Interest P amp I This is described in 3 5 Some items in this dialog are followed by a c or a d c indicates that amounts in this row have been capitalised i e borrowed d indicates that the amounts in this row have been used to repay debt Credit Line Payments dialog If a credit line has been chosen as the loan type see 3 5 clicking on any of the cells in the projection columns in the Investments row opens the Credit Line Payments dialog showing the derivation of the principal payment Credit Line Payments Year Total income Total expenditure Home loan payments Wasimum interest Cash available Cash paid Total loan payments PIA User Guide Page 24 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Investments 40 000 Loan amount 379 356 379 356 379 356 379 356 379 356 379 356 Equity 20 644 44 644 70 084 97 051 155 935 336 983 The value in the input column on the Loan amount row on the spreadsheet shows the total loan amount at the time of purchase The values in the projection columns show the anticipated loan balance at the end of each year Loan Amount dialog Clicking on the Loan amount row title on the Investment Analysis spreadsheet opens the Loan Amount dialog The initial loan amount represents the total of all costs property price purchase costs loa
128. here is a facility for switching interest to being wholly deductible See the Loan Interest amp PIA User Guide Page 84 PIA Version 7 320 Chapter 6 Linked loans spreadsheet Type dialog If the capitalised component is deductible you will need to determine the current status for your specific situation there is a financial tax advantage in effectively converting non deductible debt home loan into deductible debt investment loan Even if capitalised component is not tax deductible this method may still be of value by acquiring an investment property without any increase whatsoever in cash flow commitments Using the linked loans feature the home loan is paid out faster whether or not your debt component is tax deductible You may also have the added advantage of accumulating equity in your investment property while the total loan repayments are limited to that of the original home loan Using a credit line The use of a credit line for accelerated home loan reduction has already been described in Chapter 4 the Home Loan Analysis spreadsheet Credit line settings are independent for each spreadsheet This means that if this option has been selected in the Home Loan Analysis spreadsheet it is not automatically selected in the Linked loans spreadsheet The credit line toolbar icon will not be depressed Nevertheless if a credit line has been selected in the Home Loan Analysis spreadsheet it will be used to calculate the Term remainin
129. hoose to pay rather than borrow the Loan costs PIA displays a message indicating that the Loan costs have been reduced The total investment is adjusted accordingly In the Investment Analysis spreadsheet the values in the projection columns of the nvestments row allow you to enter additional cash outlays made during the years shown These could include such things as principal payments on a principal amp interest loan or simply a cash payment to add a capital improvement Investments At 2013 Cash Invested Equity Invested Loan Costs Property cost 40 000 0 360 000 400 000 Renovation costs Purchase costs Furniture package Holding costs JJ s dlae Loan costs Additional loar 4 93 a E m DI co DI iT 7 Totals 419 356 To be used where you already have equity in the property After Purchase 7 Cancel k PIA User Guide Page 23 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Annual Investments dialog Clicking on any of the cells in the projection columns opens the Annual Investment dialog revealing the derivation of the total amounts shown If a credit line has been chosen as the loan type see 3 5 the Credit Line Payments dialog opens showing the derivation of the principal payments see below Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous
130. i The Rack FIN Properties Finance or Investor from Bank of Queensland FIN Westpac FIN the dropdown menu at the bottom of Heritage FIM the Save Component dialog click on the component you wish to load and 23 ING FIN click on the Open button ES St George FIN A component is a subset of a PIA file that describes one of the three File name major aspects required for investment analysis pra Fnnce Dees Property and its attributes Files of type Finance fi SE Finance and its attributes Investor s and their attributes Components are used in PIA as a way of mixing and matching different properties different sources of finance or different investors When loaded the data in a component replaces the corresponding information in the open document Save Component a Valge Clicking Save Component opens the Save Component dialog allowing you Save Component to specify a file name and file type for e the component you wish to save A Save in gt Fl Fro e j e Ej component can be a property a loan or an investor All parameters relating zi ide FIM Suncorp FIM to the chosen component are saved in The Rock FIN a me eT Bank of Queensland FIN Westpac FIM o save a component selec _ i Properties Finance or Investor from epee Fi the dropdown menu at the bottom of ne the Save Component dialog enter the E St George FIN filename without a filename extension and click the Save button
131. ialog The two examples show how the loan value ratio alters over time as the value of the property increases and the home loan balance is reduced Home Loan Value Ratio el _ RAIS Initial 16yr T 18yr Home loan balance 336 000 no 45 23 476 0 0 Value of residence 430 000 1 2179m 1 293m 1 37m 1 452m Loan value ratio 70 0024 45724 1 8224 0 0024 0 002 Home Loan Value Ratio Years Initial Tyr 1Oyr Home loan balance 36 000 326 989 317 230 306 661 202 019 203 588 Value of residence 480 000 50S 800 Ag a326 571 689 B42 3468 059 607 Loan value ratio Z000 64274 5882 S3 644 44 0342 23684 PIA User Guide Page 63 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet Loan value ratio 70 00 Your net cost per year Term remaining 17 7yr 35 565 35 565 35 565 35 565 35 565 The input column of the Term remaining row displays the number of years remaining to pay out the loan for your home completely The remainder of the row displays the annual net cost see 4 19 For the loan to be repaid the repayments must be greater that the interest being charged by the lender If the repayments are not sufficient to meet the interest bill the loan cannot not be repaid and the term remaining is not defined Settings menu 7 7 Loan value ratio 70 00 Your net cost per year Term remaining 17 7yr 35 565 35 565 35 565 35 565 35 565 The projections columns in this area show the net sum of all the loan repaym
132. icking Specify Annual Rates button on the Loan Interest amp Type dialog or clicking the projected interest values in the Investment Analysis spreadsheet displays the Annual Interest Rates dialog This dialog allows you to enter interest rates for individual years and individual loans The nterest and Principal rows under Loan A and Loan B show the interest paid and the principal repaid each year The Totals area at the bottom of the dialog shows the total principal remaining Totals row the total interest paid per year Interest and the total payments per year Payment The Average interest rate field shows the average interest rate for the period of the loan Overwriting it resets the interest rate for all years Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous five years Annual Interest Rates ear Tyr tu ST Loan 4 205 469 209 469 Rates WA 7 00 Interest 19 583 19 983 Principal Loan B c Zz E 2 Interest Principal Totals 285 469 205 4689 285469 285 469 285 469 Interest 13 583 19 583 13 583 19 983 15 983 Payment 13 983 19 983 19 983 19 983 19 983 Average rate 7 00 delel oe emt PIA User Guide Page 34 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 11 Rental expenses row Interest I O 8 00 30 348 30 348 30 348 30 348 30 348 Rental expenses 30 89 5 621 5 846 6 080 6 576 8 001 Pre tax c
133. ile extension PIA Note that settings which are not property specific but cover items in the Settings menu such as Stamp Duty Tax Scales and Preferences are stored in the Settings file not the property file Property value Investment Analysis spreadsheet The property or market value is the price you would reasonably expect to get for the property if it were to be sold Purchase costs Investment Analysis spreadsheet Purchase costs are those extra costs associated with the acquisition of an investment property These include solicitor s fees conveyancing costs and stamp duty PIA User Guide Page 138 PIA Version 7 320 Appendix A Glossary Real IRR real return The after tax after inflation rate of return See nternal Rate of Return Redraws Home Loan Analysis spreadsheet When using a credit line all income is paid into the loan account reducing the principal Redraws are funds withdrawn from that account for example to pay living expenses Refinance costs Costs associated with refinancing or consolidating a loan including establishment fees and registration of mortgage Registration code When entered with the licensee s name the registration code unlocks the software turning a demonstration version into a full version Rental expenses Expenses associated with a property that is rented often referred to as rental expenses Rental income Income derived from rent Projected annual rents which can be
134. in the Investment Analysis spreadsheet for all the investment properties purchased at the beginning If the initial savings are set to zero it means that the initial outlay must also be zero and all costs borrowed If an initial outlay was made deposit paid for the initial investment property PIA assumes that an outlay of the same level same percentage of the property value applies to subsequent properties Accumulated Cash Savings dialog Clicking on the Cash savings row title or on any of the values in the projections columns opens the Accumulated Cash Savings dialog This shows the total income and expenditure as well as net and accumulated savings for each selected year of the projection The accumulated savings figures are also shown in the projections columns of the Cash savings row Accumulated Cash Savi men Sty Year Properties Cash in Rental income Other income net Total Cash out Tas payments Rental expenses Loan payments Living Gxpenses Total Cash surplus Cash surplus after EL Initial outlays Initial savings Accumulated savings PIA User Guide 17 056 35 000 112 036 5 340 5 62 65 914 30 950 108 425 4 411 Page 79 16 549 6 500 11 343 6 099 5 046 65 914 32 100 110 807 6o43 13 291 102752 122 043 oon 6 080 65 914 33 476 Wei fb 10 554 10 721 20 566 111 137 132 002 12 370 barb 65 914 36 207 121 067 10 935 PIA Version 7 32
135. income for the entity will be the regular superannuation soniibutions ETA made Wo one or more investors If you choose to apply the SMSF settings then the following changes to the model take place 1 Ownership is in a single name i e the SMSF Self Managed Su per Fund Optio ns 2 The annual income one entity only and expenses will be as specified in the dialog 3 The tax scale will be that pertaining to superannuation funds see Settings menu Tax Scales 4 The CGT discount will be changed to that as specified in the dialog 5 Living expenses home value loan and repayments are not applicable and are set to zero If you also choose to apply a Pension Phase for the SMSF then from the year you specify there will be no tax on the fund s earnings and no capital gains tax on sale There may well be changes to the SMSF tax laws and you would be well advised to check with the Tax Office A proposed change at the time of publication was to introduce a tax 15 on earnings over 100 000 When dealing with superannuation funds it is often useful to monitor the total cash flow into and out of the fund including that of the investor contributions This Annual Cash Surplus can be displayed at the bottom of the Investment Analysis spreadsheet by clicking the corresponding checkbox in this dialog These settings will not be involked until you click the Apply SMSF Settings checkbox and OK Set Country Defaults Clicking Set Country Defaults all
136. inflation indexed or specified directly represent the potential rent less any vacancy factor Sales commission Commission payable to the agent on sale of a property Rates vary depending on location Settings file Settings which are not property specific but cover items in the Settings menu such as Stamp Duty Tax Scales and Preferences are stored in the Settings file The settings file has the filename extension SET and is stored in the default folder Stamp duty A tax payable on the transfer of title of a property Stamp duty is an Australian State based tax and is based on the sale price of the property See also Exit stamp duty Taxable income Total income liable to income tax Such as salary interest less total allowable tax deductions Tax credits Investment Analysis spreadsheet Tax credits can be thought of as tax refunds which in PIA are credited in the same year they occur For a property ina single name tax credits can be calculated from the marginal tax rate or more precisely using taxable income For a property in joint names the tax credits must be calculated using the taxable incomes of both partners joint For a property purchased in joint names you can specify the proportional ownership Tax liabilities Tax payable to local state or federal governments Tax savings Tax Benefits dialog A reduction in tax liability resulting from a deductible expense see Tax credits Tax scales Scales used
137. ing expenses redrawn This would give you an idea of just how fast you could possibly repay the loan e This spreadsheet is also an important precursor to using the Linked loans Analysis spreadsheet see Chapter 6 and the Wealth Builder spreadsheet see Chapter 5 as both rely on you having simulated your current home loan debt and repayment schedule This chapter describes each of the variables of the Home Loan Analysis spreadsheet and their accompanying dialogs row by row from top to bottom N You can open the spreadsheet by clicking on the triangle shaped icon in the toolbar Dl The Home Loan Analysis spreadsheet has the same basic layout as the Investment analysis spreadsheet For details of the user interface please see Chapter 2 PIA User Guide Page 50 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet 4 1 Year row John Doe for personal use only Home Loan Analysis Input Projections over 10 years End of year 2013 lyr 2yr 3yr 5yr 10yr Home value 480 000 508 800 539 328 571 688 642 348 859 607 In order for PIA to collate and synchronise information from both investment and home loans the Year row is common to all PIA spreadsheets see 3 1 As the primary focus of PIA is the Investment Analysis spreadsheet the year in the Input column usually represents the year of purchase of the investment property which by default is set to the current year The Home Loan Analysis spreadsheet is normally synchronised to
138. ing the Remove button or the Remove All button at Select Current Portfolio Files PIA User Guide Page 107 PIA Version 7 320 Chapter 7 Menus and toolbars Changing directory Clicking the Directory button opens the Select Directory dialog allowing you to select a directory from which to add files All files making up a portfolio must reside in the select Directory one directory Locate directory Report See gia soe Te eee E eee pee seer Clicking the Report button in the Current Investment Cy Program Files Somerset PIAproniew Portfolio dialog generates and displays a cash flow analysis report on the current investment portfolio RipCast 1 9 H Secure IE Setups and archives To print the report click the Print icon in the toolbar To return to the spreadsheet press the ESC key or click the appropriate spreadsheet icon in the toolbar Why create a portfolio PIA allows you to collate the property and finance data from a specified set of property files portfolio to calculate the combined cash flows and the rate of return for the portfolio You may want to create a portfolio for any combination of the following reasons 1 To account for the information cash flows asset values and debts tax deductions etc in the portfolio when analysing the tax benefits of yet another investment property i e the one shown in the Investment Analysis spreadsheet 2 To take account of the i
139. ing the investment loan and investment expenses while repaying the home loan debt Capitalise Interest Clicking Capitalise Interest in the Settings menu instructs PIA to change the nature of the investment loan so that interest accruing is simply added to the loan amount rather than being met from the cash flows This is reflected in the nterest row in the spreadsheet The row title changes to nterest c By default PIA assumes that the interest on the capitalised interest component is not tax deductible See also Capitalize expenses below Capitalise Expenses Clicking Capitalise Expenses in the Settings menu instructs PIA that rather than being met from the cash flows rental expenses are simply added to the loan This is reflected in the Rental expenses row in the spreadsheet The row title PIA User Guide Page 122 PIA Version 7 320 Chapter 7 Menus and toolbars changes to Rental expenses c By default PIA assumes that any interest over and above the interest on the original balance is not tax deductible see Capitalise interest above Capital Gains Tax Clicking Capital Gains Tax in the Settings menu opens the Capital Gains Tax Settings dialog allowing you to select the method used to pars calculate capital gains tax CGT CGT Calculation Method Australian capital gains tax CGT rules have changed in recent years as a result of the Ralph Review of Taxation tax is now based on a discount method The discount rate for m
140. isplayed es 16 233 Properties 34 006 Remaining liability 1 503 Property Details These SESE O Other 0 Adjusted tax 116 include the date of Total income 9 233 Total deductions 34 006 Flatrate percentage 5 014 i Include new property Rents 15 208 M162 a070 1 pes Date purchased 11 1 2005 Interest 19983 3362 12707 22 069 purchase the proportion of the property that you the Taxable income 41 227 Tax rebates 1E 3 investor own as well Report Cancel as the rental income and rental deductions interest expenses and non cash deductions If the date of purchase falls within the current financial year PIA calculates the fraction of the year remaining and apportions the annual rental income and rental deductions for the new investment property accordingly The defaults are derived from the current spreadsheet but you may wish to override these Current rental income and rental deductions refer to an existing investment property portfolio if one has been specified see Current Investment Portfolio Assessable Income This shows the derivation of total assessable income for the financial year Allowable Deductions This shows the derivation of total allowable deductions for the financial year Projected Tax Liabilities The new annual tax liability which takes account of the investment property is displayed here From this the remaining tax liability for the year is calculated along with the
141. ital cost includes the building cost plus any renovation costs You can enter the appropriate depreciation rate into the Depreciation rate field see notes below The Depreciation of building field shows the first year s depreciation An in depth treatment of all the changing rules and regulations governing depreciation is beyond the scope of this publication however for more detail on depreciation rules and schedules there are several booklets readily available to property investors In Australia please see the booklets Rental Properties NAT 1729 and Guide to Depreciation NAT 1996 both of which are published by the Australian Taxation Office and available from their website www ato gov au In New Zealand please see the booklet Rental Income IR 264 published by the New Zealand Department of Inland Revenue and available from their website www ird govt nz PIA User Guide Page 38 PIA Version 7 320 3 14 Depreciation of fittings or chattels row Deprec of building Deprec of fittings Loan costs 2 50 5 000 24 000 3 850 4 931 986 Chapter 3 Investment Analysis spreadsheet 5 000 5 000 5 000 5 000 5 043 3 487 1 795 526 986 986 986 This row title is dependent on the default country setting you selected for PIA Australia or New Zealand in the Specify Country Defaults dialog see Chapter 2 3 Deprec of fittings Deprec of chattels Australia selected New Zealand selected The term fittings or chattel
142. item in the Reports and Calculator menus see Chapter 7 Projected values over Fr rs TO yrs Property value 373 855 465 891 Loar 205 469 209 469 E quity 96 306 180 422 Approximate costs if sold Capital gains tax 17 819 46 096 Solicitar s fees 1 869 2 329 Sales commission 10 776 Stamp duty on sale 0 Other selling costs 0 Equity after sale 118 689 PIA User Guide Page 28 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 7 Capital growth rate row Equity 20 644 44 644 70 084 97 051 155 935 336 983 Capital growth rate 6 00 6 00 6 00 6 00 6 00 6 00 Inflation rate CPI 4 00 4 00 4 00 4 00 4 00 4 00 The value in the input column on the Capital growth rate row title shows the anticipated average annual rate of growth of the property market value If you select and overwrite this value the growth rate for all years is set to the new value The values in the projection columns show the anticipated capital growth rates for the individual years of the projection These values can also be selected and overwritten in which case the change is reflected in the corresponding property values Investment Property Growth dialog Clicking on the Capital growth rate row title or double clicking on any of the cells in the row opens the Investment Property Growth dialog If you select and overwrite an individual property value in the Property Value row of the Investment Analysis spreadsheet the change is r
143. iving expenses plus home loan repayments Investments Investment Analysis spreadsheet Investments is a collective term covering the investor s entire contribution to the rental return and equity accumulation process i e it is needed to calculate the precise return on investment Generally Investments simply represents the cash invested at the time of purchase These cash investments can contribute to the purchase price for example a property deposit renovation costs associated purchase costs and even loan costs if there is aloan Investments can also represent cash invested after purchase e g regular or lump sum loan repayments Where you wish to simulate the cash flows starting now on an existing investment property in which you already have substantial equity Investments would also include that existing equity PIA settings file PIA has default settings for such things as stamp duty sales commission and tax These can be set via commands in the Settings menu see 7 6 The settings are stored a file in the program directory Portfolio analysis During portfolio analysis PIA collates of all the property and financial data on each of a selection of properties to calculate the projected cash flows and rate of return for a specified time frame Pre tax cash flow These are all of the monies that flow in or out of your pocket before tax is taken into account In most cases they represent the gross rent less interest expenses and an
144. lease do not hesitate to make comments or suggestions You can use the email function at the website to submit your comments Navigation tips You can use the table of contents on pages ii and iii at the front of this document to navigate Use the Table of Dialogs at the end of the manual to find a particular dialog PIA User Guide Page 3 PIA Version 7 320 Chapter 1 Welcome to PIA 1 4 Versions The PIA User Guide documents the fully featured versions of the PIA including spreadsheets for home loan analysis linked loans analysis and a wealth builder for interactively building a property portfolio over a number of years PIA s extensive graphics suite of property and finance calculators and the wide array of report options are also documented This PIA User Guide is based on PIA Version 7 2 using the Windows XP operating system If you are using an earlier or later version of Windows such as Windows 98 Windows 2000 Vista Windows 7 or 8 windows and dialogs may have a slightly different appearance as shown below Loan Amount At Purchase Outlays Loan Costs Property cost 175 000 175 000 Renovation costs i Dialogs with Windows XP Purchase costs 5 438 Furniture package 0 Loan costs 2 bad Additional loan T Totals 183 072 183 072 Loan Type 7 UF Cancel Loan amount x At Purchase Dutlays Loan Costs Property cost 0 175 000 175 000 Renovation costs o 0 Purchase costs o 5
145. les displayed on the spreadsheet then gives a detailed explanation and breakdown of all input variables displayed on the spreadsheet This report also includes details of projected internal rate of return IRR tax benefits and investment capacity The report shows the projection period selected in the Investment Analysis spreadsheet To change the projection period see 3 1 Set Projections Investment Analysis Descriptive report Clicking Investment Analysis Descriptive generates and displays a full financial report of the cash flow analysis and anticipated internal rate of return for current investment property The report several pages in length contains a breakdown of all of the input variables on the spreadsheet and shows how the cash flows are derived The report shows the projection period selected in the Investment Analysis spreadsheet To change the projection period see 3 1 Set Projections 40 Year Projections report Clicking 40 Year Projections generates and displays a report on the projected value of the selected property your equity rent total deductions pre tax cash flow your tax credit and after tax cash flow for each year over a forty year period Values shown in red are negative Home Loan report Clicking Home Loan generates a Home Loan Analysis report that comprises e Details of the Home Loan Analysis spreadsheet s computer projections e Details of home loan payments and balance including property value lo
146. lised Interest a a A in TotalLoar 285 469 Split rate Capitalized component tax deductible the Investment Analysis Interest 19 983 spreadsheet changes to Payment 19 983 Specify Annual Fates H Ok Cancel Investments principal ae Te fs ree ee and the nterest row title changes to nterest P amp I Where a loan is chosen for which the interest is borrowed Capitalise Interest there are no principal or interest payments The loan balance increases in line with the interest owed while investor s cash flow is usually positive being made up of the net rental income and tax credits The nterest row title changes to nterest c Where a Credit Line has been specified that is one in which repayments are made in accordance with the investor s full disposable income CL appears in the row title Under a Credit Line PIA calculates the total income of the investor and partner their total committed expenditure living expenses mortgage payments and tax liabilities and any extra is used as additional principal payments off the loan Examine the Credit Line Payments dialog described in 3 4 to see how the payments are derived Loan Type The Loan Type checkbox provide an option to have split loans two loans Loan A and Loan B or split rates one loan with two rates Rate A and Rate B If the checkbox is ticked the total rate of interest is the sum of each rate in each year which in turn are specified in the Annual Rates
147. little interest With a credit line surplus cash helps reduce ee i ene zu your interest bill This can be done by checking the Use all available Fortnightly Payments simulated cash for payments check box To simulate fortnightly payments of halt Please note that income is specified in the Current Income dialog in the regular monthly payment you make the Investor menu and living expenses are specified in the Living Expenses dialog in the Investor menu For further details please see Chapter N 1 12 regular payment Regular Payments In the Regular Payments area the Regular monthly payment is Add to extra Remove trom extra normally the scheduled amount to be paid monthly in arrears so that the entire loan is repaid over a pre determined number of years an extra 1 72 payment per month The Extra monthly payment line enables you specify an extra monthly payment in order to repay the loan sooner than originally scheduled Fortnightly Payments If you want to know the effect of paying half of the monthly payment each fortnight rather than one payment per month you can simulate the fortnightly payment schedule by making an additional payment each month of one twelfth of a normal monthly payment it is equivalent to making 13 monthly payments one more per year than normal Click on the Add to extra button to add 1 12 of a regular payment to the Extra monthly payment field Click the Remove from extra button to remove the p
148. ly The values in the projection columns show projected investments for the selected years Investments dialog Clicking on the Investments row title opens the Investments dialog The initial outlay is the total amount of cash as opposed to borrowed funds invested at the time of purchase Investments can be made toward the purchase price that is a cash deposit associated purchase costs renovation costs if any and loan costs if there is a loan Investment can also take the form of equity For example where you have already owned the investment for many years and want to evaluate the return on investment for a renovation of that property Use this field to ensure that the Loan amount is correct for an investment property that you already own Any cash or equity invested reduces the size of the loan For example paying the loan costs as an initial investment results in a smaller loan which in turn reduces loan costs PIA adjusts loan cost contribution in this case You can specify each cost item separately in the Investments dialog Any entry in the Investments column results in a corresponding reduction of the value shown in the Loan column The sum of the two is shown in the Costs column The combined values in each row of the Investments and Loan column cannot exceed the value shown in the Costs column If the value is exceeded PIA displays an error message prompting you to review your entries in the appropriate dialog If you c
149. ly equity increases as your home value increases and the loan is repaid The value in the input column on the Home equity row title shows the current equity in your principal place of residence The values in the projections columns show the projected equity in the home in the selected years Home Equity dialog Clicking on the Home equity row title or on any cell in the row opens the Home Equity dialog This shows the derivation of the equity projections projected value less projected loan balance for up to forty years For details about how to set projections see 3 1 Home Equity ears Initial Fyr 10yr Home value 450 000 50 500 od 320 of bag B42 345 oo 607 Home loan 336 000 326 503 a17 230 306 661 202 019 203 988 Home equity 144 000 181 811 eee 098 265 026 359 529 656 019 l PIA User Guide Page 54 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet 4 5 Amount owing row l Home equity 144 000 181 811 222 098 265 026 359 529 656 019 Amount owing 336 000 Refinance costs SO The value in the input column of the Amount owing row normally represents the total amount owing on the loan for your home If this is the case it is possible to change the amount by selecting it with the mouse and over writing it The amount must correspond to the end of the year shown at the top of the input column see 4 1 usually the current year However as outlined below the amount may represent not just a home l
150. m 1 487m Loan value ratio 81 76 70 61 40 Rental income 4 00 17 836 18 549 19 291 20 866 25 386 The values in the projections columns in the Loan value ratio row show the predicted Joan value ratio LVR for the selected years The LVR is simply the ratio expressed as a percentage of the total loans to the total value of properties used as security for those loans Naturally the lender would not want the LVR to exceed 100 as it would not be possible to recover the total loan amount if you were to default on the loan repayments In fact if the LVR exceeds a certain figure usually around 80 the lender may insist on mortgage insurance which the borrower has to pay for Loan value ratio dialog Clicking on the Loan value ratio row title or on any of the values in the projections columns opens the Loan value ratio dialog This shows the derivation of the LVR for each year of the projection taking into account the total value of investments and your home as well as the amounts owing on existing loans Loan Value Ratio LVR Start of pear Properties Value of properties Value of home Total value Existing loans Hew loans Total loans Loan value ratio PIA User Guide 400 000 450 000 oo 00i 336 000 279 356 15 356 61 294 Page 71 424 000 BOS S00 J32 00 r06 345 fb 345 fo f24 449 440 539 326 988 768 636 586 636 586 70 4524 504 991 605 989 1 11m r457 674 571
151. mand move the mouse pointer off the button before releasing the mouse button The right area of the status bar indicates latched keys CAP Caps Lock is latched on NUM Num Lock is latched on SCRL Scroll Lock is latched on The example below shows the status bar tip with the Home Loan Analysis button in the toolbar pressed and the CAPS NUM and SCRL locks latched on sho or hide home loan analysis spreadsheet CAP NUM SCRL A PIA User Guide Page 11 PIA Version 7 320 2 6 Elements of the PIA spreadsheets Titles column End of year Property value Purchase costs Investments Loan amount Equity Capital growth rate Inflation rate CPI Gross rent week Cash deductions Interest iO Rental expenses Pre tax cash flow Non cash deductions Deprec of building Deprec of fittings Loan costs Total deductions Tax credit single After tax cash flow Rate of return IRR Pre tax equivalent Address Description Property cost Gross rent yr 1 Net rent yr 1 Cash neutral investment Input column Untitled Somerset PIA Investor Calculator wiew Settings Help Lo fe willis alts lt li gt eo ehe ohn Dough for personal use only Input lyr 424 000 y 449 440 14 425 40 000 379 356 20 644 6 00 4 00 350 379 356 44 644 6 00 4 00 17 836 379 356 70 084 6 00 4 00 18 549 6 00 30 89 40 000 30 346 6 621 18 134 30 348 5 646 17 645 2 50 24 000 4 931
152. me and investment loans in Australia and New Zealand the interest on a home loan is not tax deductible whereas the interest on an investment loan can be claimed as a deduction against both property and non property income there is a financial advantage in repaying a home loan before an investment loan This is the rationale behind the Linked Loans spreadsheet Repaying a loan faster will always involve making higher or more frequent repayments or both The Home Loan Analysis spreadsheet already allows you to investigate ways of accelerating home loan reduction using such facilities as credit lines or extra or fortnightly repayments There are three main scenarios Additional home loan repayments are made using surplus cash flows from an investment property lt A credit line is used to accelerate the reduction of a home loan but investment loan repayments must also be taken into account A credit line is used to accelerate the reduction of both home and investment loans As these techniques impact on both investment and home loans the variables displayed on the Linked loans spreadsheet are a combination of those from the Investment Analysis spreadsheet with details of your investment property see Chapter 3 and the Home Loan Analysis spreadsheet with details of your home loan see Chapter 4 The descriptions in this chapter assume that you are acquainted with these two spreadsheets Like the Home Loan Analysis spreadsheet t
153. ments Whereas the IRR gives the after tax rate of return this cell displays the equivalent before tax rate of return using the marginal tax rate to make the adjustment The Pre tax equivalent of the Internal Rate of Return provides a useful comparison with cash investments as this is the interest rate that you would need to achieve from a bank to get the same after tax return Any such bank interest would be taxed at your marginal rate This is not to be confused with the Pre Tax Internal Rate of Return which is the return calculated on your pre tax cash flows Pre tax Equivalent of IRR dialog Clicking on the Pre tax equivalent row title or input column opens the Pre tax Equivalent of IRR dialog This itemises both pre tax cash flow and equity and shows pre tax IRR after tax IRR marginal tax rate and pre tax equivalent of IRR In the example the after tax IRR is 13 32 while the pre tax equivalent is shown as 23 57 In other words to achieve the same after tax return 13 32 on your cash investments you would have to invest your money at 23 57 There are several options for displaying useful investment indices as the bottom line for the investment This row can be replaced with Net present value or the Real IRR that is inflation adjusted For details see the Preferences option in the Settings menu in Chapter 7 Pre tax Equivalent of IRR ear Initial Tyr 2r ayr Fyr 10yr Pre tay cash flow 30 000 3 106 5 069 ABB
154. n 7 320 Chapter 6 Linked loans spreadsheet 6 7 Loan balance row Loan interest 8 00 26 554 25 806 24 996 23 169 17 097 Loan balance 336 000 326 989 317 230 306 661 282 819 203 588 Total LVR 81 29 Your total net cost per year The figures in the Loan balance row reflect the amount owing at the end of each year after all loan additions and repayments are accounted for If the investment and home loans are linked repayments may also include any investment surplus from the investment property cash flows If the home loan has been refinanced the initial loan balance may also include Refinance Costs see 4 6 Clicking on Loan Balance row title or on the value in the input column displays the Loan Consolidation dialog 4 5 This facility allows you to consolidate and refinance all your non deductible principal and interest loans into the one mortgage package with your home loan Clicking on a value in the projection columns displays the Home Loan Balance dialog This is the same dialog as described in 4 16 except that it has an extra row Investment surplus Home Loan Balance PIA User Guide Year Initial loan balance Loan Additions Interest added Regular redraws Irregular redrayys Total r Loan Payments Regular payment Regular estra regular extra Investment surplus Total Tyr 336 000 26 554 2b a4 35 969 25 565 326 999 25 806 25 006 25 565 35 565 Aur a1 7 230 24
155. n accompanying dialog as these values are calculated by PIA and cannot be overwritten directly Negative calculated values are shown in red Although new users are encouraged to use the Data Entry Check List at first once you gain experience you can bypass this feature and enter data directly into the spreadsheet Titles column The Titles column contains the name of the spreadsheet here Investment Analysis and the row titles Where appropriate clicking on the row title opens a corresponding dialog which then allows you to drill down to various entries and settings that result in the values shown These row titles change colour when the mouse pointer passes over them and the mouse pointer turns to the familiar pointing hand The row titles are dynamic changing to reflect the current input settings Input column The nput column contains the variables from which the annual projections are calculated Collectively these variables define the attributes of the investment property how it is being financed and the rates at which some variables change Projections columns This area of the spreadsheet contains the annual projections based on the input variables specified in the input column While PIA calculates projections up to 40 years only five years can be displayed at a time These five years do not need to be consecutive years for example years 1 2 3 5 10 but the year in the right most column determines the time frame over
156. n costs etc less any initial investments If renovations were carried out immediately the loan would account for these costs as well Additional loans may also be sought for items such as furniture or to help supplement initial cash flows The Equity Invested field allows you to enter the amount of equity in an investment property that you may already own For example you might use this option if you have owned an investment property for many years and only wish to analyse the current cash flows and or are evaluating the investment return on major renovations that you wish to undertake The values for Property cost Renovation costs Purchase costs and Furniture package are those entered in the Investments dialog described in 3 4 Loan Amount At 2013 Cash Invested Equity Invested Loan Costs Property cost 40 OO l 360 000 400 000 Renovation costs Purchase costs Furniture package Halding costs Loan costs Additional loan I Totals 379 396 419 356 To be used where you already have equity in the property Loan Te 7 Cancel PIA User Guide Page 25 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Investment Loan Balance dialog Clicking on any of the cells in the projection columns of the Loan amount row opens the Investment Loan Balance dialog which reveals the derivation of the totals shown Annual loan balances are
157. n in the first example of the Total Tax Deductions dialog 2 Where interest has been capitalised and the capitalised component is deemed not deductible the capitalised component is shown as being subtracted from the Interest deduction as shown in the second example of the Total Tax Deductions dialog See 3 70 Interest row Capitalize Interest PIA User Guide Total Tax Deductions Bal 2yr ayr Interest 193 953 13 983 Expenses 4 499 4 589 Deprec of building 3 r50 3 750 Deprec of fittings 3 552 2443 Loan costs 443 399 Total deductions 31730 Jarod a1 f bed af eledel Total Tax Deductions ear 006 400 008 Interest 20 637 22 120 o f 20 Expenses 4411 4 499 4589 Deprec of building 3700 arol 3 750 Deprec of fittings 2 580 3 552 2443 Loan costs 199 799 399 Capitalized interest 653 7 2145 6 3745 2 Total deductions 31730 Jarod a1 b4 Page 42 lt lt lt to select the next next five previous or previous five years 186633 7 29 417 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 17 Tax credit row Total deductions 45 806 47 224 45 902 44 706 43 876 Tax credit single 65 000 9 929 10 165 9 392 8 323 6 850 After tax cash flow S40 000 8 205 7 480 7 745 7 736 6 113 The name of the row title changes to reflect how tax credits are calculated Tax credit Calculation based on a specified marginal rate Tax credit single Calculation based on taxa
158. n in the bottom row If you have specified that tax credits be used to reduce the investment loan through additional principal repayments see 3 4 and 3 5 the after tax cash flow is the same as the pre tax cash flow Note that in this case tax refunds are credited for the year on which they are based Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous five years After tax Cash Flow Year Tyr 2yr Sur Rent 15 200 15 534 15 906 Cash outlays 0 0 D Principal payments 0 0 0 Interest 19 953 19 953 19 953 Expenses 4 411 4 499 4 589 Fre tas cash flow 9 106 0 oad 0 667 Tas credits 5 4159 B799 HAr After tax cash flow 300r 3 090 3140 Cost per week r PIA User Guide Page 45 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 19 Rate of return IRR row After tax cash flow S40 000 8 205 7 480 7 745 7 736 6 113 Rate of return IRR 15 27 Your cost income per week Pre tax equivalent 23 13 158 144 149 149 118 This item is one of the measures used to evaluate the investment The nternal Rate of Return IRR is a measure of the return on a series of cash flows where the time factor is taken into account On the spreadsheet the input column shows the IRR over the projected years of the investment It is calculated by taking into account all of the after tax cash flows negative values represent yo
159. ncome per week Property Details area Home Loan Analysis spreadsheet Year row Principal residence row Capital growth rate row Equity row Amount owing row Refinance costs row Regular Repayments row Extra repayments row Irregular repayments row Total repayments row Regular redraws row Irregular redraws row Total redraws row Interest rates row Interest row Loan balance row Loan value ratio row Term remaining row Your net cost per year Wealth Builder spreadsheet Start of year row Home value row Home loan balance row Investment property value row Total inv properties row PIA User Guide Page iii Contents PIA Version 7 320 6 1 Chapter 7 7 1 7 2 re 7 4 To 7 6 7 7 7 8 7 9 Total of all loans row start of year Total of all values row start of year Loan value ratio row Rental income row Other income row Total income row Rental expenses row Living expenses row New tax row Loan payments row Total expenditure row Cash savings row Debt service ratio row End of year rows Total value row end of year Total loans row end of year Net worth row Investment equity row Linked Loans spreadsheet Structure of the Linked Loans spreadsheet Using the Linked Loans spreadsheet Investment property rows Investment term and surplus Home value rows Loan interest row Loan balance row Total LVR loan value ratio row Term remaining Using the Capitalise interest and Capitalise expenses optio
160. nflation rate Investment Analysis spreadsheet The expected long term average annual rate of inflation which determines the rate of increase in rent rental expenses rates insurance etc and any other taxable income PIA User Guide Page 136 PIA Version 7 320 Appendix A Glossary Interest only I O loan A loan type that allows the borrower to pay the interest only without paying off the principal Contrast Principal amp interest loan Interest rate The percentage of the loan paid as a charge for the loan normally expressed as annual interest Internal Rate of Return IRR Investment Analysis spreadsheet The Internal Rate of Return IRR is a measure of the return on a series of cash flows where the time factor is taken into account Here it is calculated on the after tax cash flow your investment and subsequent equity See 3 19 Investment capacity Investment Capacity dialog This refers to the amount of investment property that an investor or a couple can afford after setting aside sufficient monies to cover their normal living expenses Investment equity Wealth Builder spreadsheet The investment equity is the difference between the total value of investment properties and the debt remaining on them If a property is sold selling costs sales commission and solicitor s fees and capital gains tax must be deducted Investment surplus Linked Loan spreadsheet Any positive cash flows from an investment property usually b
161. nformation when planning the accumulation of further investment properties in the Wealth Builder spreadsheet 3 To simply generate a cash flow report of the entire property portfolio with or without the new property under review How it works PIA extracts the relevant data from the property files apportioning rents and rental expenses according to whether the property is wholly or partly owned by the investor The time frame for the portfolio cash flow projections is determined by the settings in the current spreadsheet as set in the Set Projections dialog see 3 1 and uses the year of purchase specified in each property file During portfolio analysis PIA ignores the data on investor s taxable income stored in the individual property files as the analysis requires current taxable income taken from the current spreadsheet excluding income and expenditure on investment properties Tax Benefits Clicking Tax Benefits opens the Tax Benefits dialog see 6 14 Clicking the Report button generates a Tax Benefits report for the number of properties in the analysis showing total tax saving for investor partner and total You can examine the impact on tax savings of having the title of the investment property registered in single or joint names as well as assess the total tax savings for multiple investment properties This report can also be generated by clicking Tax Benefits in the Report menu Living Expenses Clicking Living Expenses opens
162. ns Your total net cost per year Menus and toolbars File menu Edit menu Report menu Graphics menu Investor menu Calculator menu View menu Settings menu Help menu Appendix A Glossary Appendix B Table of figures and dialogs Appendix C Abbreviations Index 142 PIA User Guide Page iv Contents 69 70 PIA Version 7 320 Chapter 1 Welcome to PIA Welcome to PIA Property Investment Analysis a powerful program designed to make it easy for investors to analyse and evaluate prospective property investments PIA helps you analyse the capital growth cash flows and rates of return on investment properties taking tax implications into account It is simple to use and as a decision tool provides the answers to a long list of What ifs on property investment PIA is an analysis tool it is not an accounting tool On the market since 1989 PIA has become an industry standard in Australia and New Zealand used extensively by leading real estate groups property marketers banks lenders and accountants and by thousands of property investors PIA was developed to complement the Building Wealth property investment bestsellers by Jan Somers the latest in the series being More Wealth from Residential Property What PIA can do for you Briefly PIA can help you make objective decisions about a potential property investment You can quickly estimate your rate of return tax savings true after tax cost an
163. ns a detailed description of how to use the Data Entry Check List Skipping the Data Entry Check List If you wish to skip the Data Entry Check List you can either simply click on OK when it is displayed or you can bypass it entirely by selecting Preferences from the Settings menu see 7 7 Click on the General tab and check the Skip check list on new property file check box Returning to the Data Entry Check List If you wish to return to the Data Entry Check List at any time select Data Entry Check List from the View menu or click on the Data Entry Check List icon in the toolbar Your current settings are shown as well as the ticks indicating which values you reviewed and or changed Changes you make directly in the spreadsheet are reflected in the Data Entry Check List values but tick marks only appear for the items you accessed via the Check List Setting defaults You can make the current values shown in the Data Entry Check List the default values for PIA by checking the Use these values as the defaults check box New files will then open with these values set The values will only be adopted if you click OK to exit the Check List You can reset PIA s factory defaults by selecting Delete Default Template from the Settings menu Exit and restart PIA to make sure that all changes take effect gt For a full description of using the Data Entry Check List please see the Quick Start Guide page 12 ff PIA User Guide P
164. nsland Stamp Duty Scales Uther costs are in use Total purchase costs Button such as Reset Scales which access the Specify Stamp Duty Scale allowing you to select the appropriate y scale Capital cost M Uses Qld The button gives access to context C Revenue cost feg in AC T Reset Scales sensitive help L 3 OK Cancel Tax Status PIA User Guide Page 14 PIA Version 7 320 Chapter 2 The User Interface 2 8 Preferences The Preferences menu item in the Settings menu allows you to tailor the user interface to your personal needs and preferences Here are some of the things you can do Change font styles and sizes The spreadsheets have been designed to display correctly using Times Roman up to font size 11 Increase magnification If you have trouble reading the screen you can increase magnification Specify file locations You can tell PIA where to store program files and where to store your PIA data files Choose the colours used in graphics Preferences are covered in detail in the Settings menu see 7 7 An example of Preferences The Colours tab in the Preferences menu item Settings menu allows you to choose the colours used in graphics and for the upper and lower parts of the Linked loans and Wealth Builder spreadsheets see 7 7 Preferences General File Locations Magnification Colours Background Colours Text Cell Colours Graphics Colours Spreadsheet Active
165. nterface When you use PIA for the first time the Specify Country Defaults dialog is displayed This dialog allows you to select between Australia and New Zealand defaults for a number of areas where the two countries differ These include m Tax scales Specify Country Defaults Stamp duties none in NZ Sales commission Financial year dates Capital allowance rules Depreciation rates 0 Terminology for example fittings Australia vs chattels New Zealand NZ Loan cost items Loan cost write off period Pease Capital gains tax none in NZ You can also vary individual defaults within PIA You can access the Specify Country Defaults dialog at any time by selecting Specify Country Defaults from the Settings menu PIA automatically displays appropriate dialogs if you change the country default If you change the default to New Zealand the Data Entry Check List described below is displayed If you change to the default to Australia the Specify Stamp Duty Scale dialog is displayed allowing you to select the appropriate stamp duty and then the Data Entry Check List described below For details of tax regulations specific to Australia and New Zealand please refer to the following documents Australia Rental Properties NAT 1729 Australia Taxation Office www ato gov au New Zealand Rental Income IR 264 Inland Revenue www ird govt nz PIA User Guide Page 8 PIA Version 7 320 Chapter 2
166. nvestment interest Capitalise rental expenses Investment Loan Repayments After home mortgage has been repaid lv Pay down investment loans Keep net cost to regular ex home loan repayments M Use all available cash PIA User Guide Page 85 PIA Version 7 320 Chapter 6 Linked loans spreadsheet Graphics Investor Calculator View Settings Help Ele ufe lin lt 2 nel ATG Al PIO As the above example shows the rows of the Linked Loans spreadsheet are divided into two main areas You will recognize many of the rows and their values from the Investment Analysis spreadsheet Chapter 3 and the Home Loan Analysis spreadsheet Chapter 4 Where rows have already been described in Chapter 3 or 4 these descriptions are cross referenced The remaining rows are described in detail PIA User Guide Page 86 PIA Version 7 320 Chapter 6 Linked loans spreadsheet 6 2 Using the Linked Loans spreadsheet You cannot effectively use the Independent and Linked loans spreadsheet until you have entered the details of your investment property into the Investment Analysis spreadsheet and the details of your home into the Home Loan Analysis spreadsheet For full details of how to do this please refer to Chapters 3 and 4 The spreadsheet icons You can use the toolbar icons to move quickly between the spreadsheets Displays the Investment Analysis spreadsheet EN Displays the Home Loan Analysis spreadsheet
167. o open the Total Loans dialog Loan payments 65 914 65 914 65 914 65 914 65 914 Total expenditure 108 425 110 807 114 277 121 067 140 387 Cash savings 40 000 4 411 10 954 18 721 38 909 119 989 This row simply totals all expenditures itemised in the rows above that is rental expenses living expenses loan payments and indicates projected values for the selected years PIA User Guide Page 78 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Total expenditure 108 425 110 807 114 277 121 067 140 387 Cash savings 540 000 4 411 10 954 18 721 38 909 119 989 Debt service ratio 154 148 142 132 108 The value in the input column in the Cash savings row shows the Initial savings recorded in the Accumulated Cash Savings dialog described below PIA assumes that you have sufficient cash savings to cover any initial deposits on properties purchased at the start of year 1 The values in the projections columns show the projected accumulated savings for each of the selected years taking into account total income and expenditure In other words the Cash savings row shows the total monies available in an account after all income and expenditure items have been taken into account Thus the cash savings in any year are the cash savings in the previous year less any initial outlays of new properties plus the net income from all sources The initial cash savings available must by definition be sufficient to cover the initial outlay specified
168. oan the interest rate and the projected annual interest payments The type of loan is reflected in the row title Interest I O Interest Only Interest P amp I Principal amp Interest Interest I O P amp I Combination of Interest Only for a number of years followed by Principal amp Interest Interest c Interest capitalised in loan Interest CL Credit Line Interest split Split loan two parts The input column shows the average interest rate over the maximum term of the loan If you select and overwrite this value the interest rate for all years for all loan components are set to the new value The values in the projection columns show the projected annual interest payments Any principal payments for example principal component of regular P amp l repayments ad hoc lump sum repayments or principal payments via a credit line are displayed in the Investments row see 3 5 Loan Interest amp Type dialog Clicking on the nterest row title or double clicking on Loan Interest amp Type the interest rate in the Input column opens the Loan r Loan A Interest amp Type dialog also Loan Interest Interest C Principal C Capitalize C Credit discussed in 3 4 This dialog allows you to specify exactly how the investment Average From To From To From To From To is to be financed 205 46 00 1yr 40yr Interest Only For an Interest Only loan z tie p the loan payment covers Loan Interest C Interest C Princi
169. oan balance but a consolidation of non deductible loans refinanced into the one mortgage Loan Consolidation dialog Clicking on the Amount owing row title or clicking or double Loan Consolidation clicking the value in the input eena hare EERS column opens the Loan ean Monthly Years Consolidation dialog This owing payment left facility allows you to consolidate Home loan EER 25 0 336 000 2 564 and refinance all your non deductible principal and interest loans into the one mortgage Personal Loar i Car Loan package with your home loan Bankcard Current Principal amp Interest Hihera Loans For each of your loans enter Current totale the principal original amount of the loan the original interest Ceneo eea Gree rate the term of the loan the Repayments amount owing in the appropriate AEE Current amount owing 36 000 columns in the Current P amp I Minimise repayments default 30 yrs Loans area Refinance Costs D Pressing the Enter key then Wantan current total repayments Total amount owing 336 000 prompts PIA to calculate the corresponding monthly payment n Bee Interest rate 8 00 and the remaining term for each Maximise repayments credit line of the loans right hand column Term years eed and to display the total amount 5s owing and total repayments in Payment specified New monthly payment b4 the Current totals line of the Current P amp l Loans area 7 OF Cancel
170. of your home i ss foto ee ee Ok Cancel is to be calculated These values may be altered in the Growth rates row in the Home Value Growth dialog End of wear Average Tor AT SHIT dur PIA User Guide Page 67 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Home value 6 00 480 000 508 800 539 328 605 989 810 950 Home loan balance 17 7yr 336 000 326 989 317 230 295 215 222 057 Inv property value 6 00 400 000 424 000 449 440 504 991 675 792 The value in the input column of the Home loan balance row shows the remaining term of the home loan The rest of the row shows the projected balance of the home loan over the projected years In general this loan will be on the home only but in general could be the consolidation of several non deductible loans see below Loan Consolidation dialog Clicking on the Home loan balance row title or on any value in the projection columns opens the Loan Consolidation dialog This enables you to enter details of all your non deductible loans including that on your home see 4 5 Home loan balance 17 7yr 336 000 326 989 317 230 295 215 222 057 Inv property value 6 00 400 000 424000 449 440 504 991 675 792 Total inv properties 1 il 1 1 1 The value in the input column of the Investment property value row title on the spreadsheet represents the anticipated average annual capital growth rate of the investment property If you select and overwrite this value the growth rate for all
171. ome Equity Home Loan Analysis spreadsheet Home Loan Balance Home Loan Details Home Loan Refinance Costs Home Loan Repayments Home Loan Value Ratio Home Value Growth Income amp Expenses Income Tax Calculator Inflation Calculator Inflation Rate Interest Rates Internal Rate of Return Investment Analysis spreadsheet Investment Capacity Investment Equity Investment Loan Balance Investment Property Growth PIA User Guide Investment Surplus 90 Investments 23 Investor s Notes 107 Investor s Personal Details 106 Joint Net Income Non Property 74 Land Tax Calculator 117 Land Tax Scale 117 Load Component 98 Loan Amount 4 25 Loan Consolidation 55 Loan Costs 41 Loan Eligibility Calculator 119 Loan Interest amp Type 27 33 Loan Payments Calculator 119 Loan Refinance Calculator 120 Loan Value Ratio LVR 72 Net Worth 83 Preferences 15 18 129 130 Pre tax Cash Flow 37 Pre tax Equivalent of IRR 47 Printer Page Setup 99 Property Details 97 Property Value 19 Purchase Costs 14 21 Reapportion Variables confirmation 112 Registration Number 6 132 Rental Expenses 35 Rental Income 31 Retirement Goals Calculator 120 Sales Commission Calculator 116 Save As 96 97 Save Changes confirmation 99 Save Component 98 Select Current Portfolio Files 108 Select Directory 109 Selling Costs 125 Set Projections 18 Specify Consultant 126 Specify Country Defaults 8 Specify Sales Commission Scale 124 Specify Stamp Duty Scale 22 Specify Ta
172. osses on the Years Undefined Values investment property C nindin ea he ad Years The Notional years and Actual years radio Actual years eg 2004 2005 buttons allow you to select how PIA displays years in spreadsheets and reports Skip check list Wealth Builder Undefined value string Disable row highlighting Show loan term Sometimes entries into PIA will result in values that cannot be represented in numbers For example if the cash flows on an investment property are positive from the start it is not possible to calculate a return default You can change this string if you wish Skip check list By default the Data Entry Check List see 2 4 is displayed when you create a new property file the structured format ensures ease of entry of key parameters for new users However experienced users may wish to bypass the Data Entry Check List and go straight to the investment analysis spreadsheet when creating a new file Here values are automatically updated whenever changes are made If you check the Skip check list check box PIA does not display a Data Entry Check List when you create a new PIA file You can still display the Data Entry Check List by clicking Data Entry Check List in the View menu or clicking the icon in the toolbar iy PIA User Guide Page 129 PIA Version 7 320 Chapter 7 Menus and toolbars Disable row highlighting If the Disable row highlighting check box is checked spreadshee
173. ost people is 50 but this may vary for companies Claw Back Since May 13 1997 the CGT rules have meant e Write back of building depreciation claims if sald that any building depreciation capital as ues ers allowance claims must be written back subtracted from the cost base when calculating the CGT Where CGT is not applicable for example in New Zealand select the CGT not applicable radio button Capital Gains Tax Settings Discount rate Stamp Duties Clicking Stamp Duties in the Settings menu opens the Specify Stamp Duty Scale dialog see 3 3 Sales Commission Clicking Sales Commission in the Settings i l menu opens the Specify Sales Commission Specify Sales Commission Scale Scale dialog allowing you to specify the sales commission scales used by PIA To Rate Flat The default setting is the state or country 18 000 5 OO E you chose for Stamp Duty scales in the Stamp Duty Scale dialog see 3 3 If you make a change to the sales commission scales these are saved to the PIA settings file ema W Default TELE Aaa aE plus GST 10 00 P OK Cancel plus flat fee Set Country Defaults Clicking Set Country Defaults opens the Set Country Defaults dialog allowing you to set program defaults that are country specific see 2 3 PIA User Guide Page 123 PIA Version 7 320 Chapter 7 Menus and toolbars Tax Scales Clicking Tax Scales in the Settings menu opens the Specif
174. ow row title displays the Pre tax Cash Flow dialog This box gives an overview of rent outlays principal payments interest and expenses for each projected year plus the net pre tax cash flow Use the toolbar scroll buttons gt gt gt lt lt lt to select the next next five previous or previous five years Pre tax Cash Flow ear Initial Tur out Ayr Rent 15 288 15 594 16 548 Cash outlays 30 000 T i 0 0 Principal payments 0 0 0 0 Interest 19 983 19 983 193 963 Expense 4 411 4499 4589 Pre tax cash flow 30 000 9 106 5 909 8 667 aJ delel PIA User Guide Page 37 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Non cash deductions Deprec of building 2 50 5 000 5 000 5 000 5 000 5 000 Deprec of fittings 24 000 3 850 5 043 3 487 1 795 526 The value in the input column on the spreadsheet shows the depreciation rate The values in the projection columns show the claimable depreciation allowance per year Depreciation of Building dialog Clicking on the Deprec of building row title opens the Depreciation of Building dialog Depreciation on the building more correctly called capital allowance represents the depreciation on all capital improvements including the original construction Depreciation of Building In some countries such as New Zealand you have the choice of depreciation methods diminishing value or straight line and the Capital Costs C
175. ows you to switch between defaults for Australia and New Zealand Save Default Template Clicking Save Default Template saves the current spreadsheet as the default template To revert to PIA s default settings click Delete Default Template see below PIA always opens a new property file with a set of default values You can modify these values at any time to create your own personalised start up template so that you do not have to modify all of the variables every time you create a new file This is especially useful for values that are specific to you and do not change very much such as your home loan details and your own living expense budget as well as your estimates for inflation growth and interest rates You can set new default values at any time by simply making the changes and selecting the Set Default Template menu item again Delete Default Template Clicking Delete Default Template deletes the current template and startup settings and resets the PIA default values to the factory settings Exit and restart PIA to ensure that all changes take effect Consultant WALK Specify Consultant Clicking Consultant in the Settings menu opens the Specify Consultant dialog This allows you to customise the consultant field in any generated reports If you are the only consultant using this copy of the Consultant Johnny Cash PIA software you might save the default template once you have completed the field mea PIA User G
176. pal C Capitalise Credit interest only The amount owed the principal l remains constant Average From To From To From To From To Loan Summary 1st year gt Loan Type p Capitalised Interest Amount Rate Only amp Interest Interest Line Amount Rate Only amp Interest Interest Line Principal amp Interest In the case of a principal amp interest loan the loan must be completely repaid over TotalLoar 285 469 Splitrate I Capitalized component tax deductible the term specified Thus the Interest 19 983 loan payments consist of B A the interest owed plus a Payment 19 983 19 983 Specify Annual Rates if OF Cancel contribution towards reduction of the principal While the loan payments stay constant the relativity of the two components changes over time the loan interest component decreases with the decrease in principal Capitalise interest For a loan where the interest is capitalised capitalise interest no loan payments are made The interest owed is simply added to the loan balance The loan balance and the loan interest components increase over time Under Australian tax law if the interest on an investment loan is capitalised that is added to the loan the interest on the additional loan that is the interest on the interest may not be tax deductible against other income This is especially the case where the rationale for capitalising the interest is to facilitate accelerated pa
177. pens the Investor Notes dialog described above The notes do not appear in any of the generated reports within PIA The facility is provided so that you can record any additional information you wish about the investor property or finance Investor Notes Current Taxable Income Clicking Current Taxable Income opens the Current Taxable Income dialog Current income and deductions are Work Income amp Deductions divided into those relating to working and those related to any existing Salary wages investment properties you may have i To enter the latter you must create an investment property portfolio by clicking Work expenses the Current Property Portfolio button see next page for details on creating a property portfolio Once this Other income Other deductions Chapter 7 Menus and toolbars T 3 cn T EA 5 z Jdi Di E DOl w Ea ol ol oy f a information is extracted from the portfolio files the income and Current Property Portfolio 7 expenses fields can then be edited if needed Rental income Your taxable income is simply your Rental expenses total income less total allowable tax deductions including any non cash Loan interest deductions such as building and fittings depreciation Whereas your current taxable income excludes non cash deductions your net income includes them as well as any tax rebates such as a spouse rebate Allowable de
178. pens the Save Report As dialog allowing you to enter a filename and optionally select a folder The folder in which the file is saved becomes the default folder File name 30 Bay Drive Cleveland If no report is currently displayed because for example you are ina Save as type FI A File Ppa al Cancel spreadsheet Save Report As is dimmed as shown in the File menu example at the beginning of this section Delete Clicking Delete opens the Delete Files dialog allowing you to select files from the default folder for deletion and then delete Delete Files them by clicking the Delete button Directo Co Program Files S omersetsPlAF pu Property Files 190R ental pia Delet 30 Bay Orive Cleveland pia See Our Example pia Revert Clicking Revert replaces the current document with the previously saved version The Revert command is only enabled when changes have been made to the document If no changes have been made it is dimmed Load Image of Property Clicking Load Image of Property displays the Property Details Property Details dialog This allows you to load an image of the property as well as to Brief Description enter its address and description If entered these items are saved with the files and Notes displayed in the relevant fields in any generated reports Additional notes confidential or otherwise can also be recorded and saved in the file These notes will not appear in
179. raduated scales are used up to a value of 870 000 Properties above this specify Stamp Duty Scale value revert to a simple flat rate for the entire l N f sum From To Rate Flat Northern Territory uses a formula to 1 20 000 150 calculate stamp duty PIA simulates this E formula using a graduated linear scale 20 001 50 000 cate New Zealand has no stamp duty on property transfers so selecting NZ changes stamp duty to zero 50 001 100 000 we 100 001 250 000 250 001 500 000 wm H s0000 700 000 me ey op oo Pe my Oo oop mop om oOo SoS oF oe om on oe Other M Default e r r r m Th TT Cancel PIA User Guide Page 22 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 4 Investments row Purchase costs 14 425 Investments 40 000 Loan amount 379 356 379 356 379 356 379 356 379 356 379 356 The value for Investments in the input column in the Investments row on the Investment Analysis spreadsheet shows the total cash and equity investment at the time of purchase Overwriting this value is a signal for PIA to allocate the amount towards the property s purchase price and to reduce the loan accordingly If the amount exceeds the cost of the property the remainder is allocated towards purchase costs renovation costs if any and loan costs if any If the amount exceeds the total cost of purchase the investment amount is reduced according
180. revious year or fewer properties than defined in an existing portfolio You can also let PIA maximise the number of investment properties according to criteria that you set see 7 4 PIA User Guide Page 68 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet 5 6 Total of all loans row start of year Total inv properties Al 1 1 T 1 Total of all loans 715 356 706 345 696 586 674 571 601 412 Total of all values 880 000 932 800 988 768 1 111m 1 487m The values in the projections columns of the Total of all loans row show the derivation of the total loan balance including any loan on your home and any loans on an existing property portfolio In other words for each projected year the total loan on all properties is the total loan on all investment properties including any you may have specified in an existing portfolio plus the loan on your own home If the Show term item is selected in the Preferences dialog the first item in the Total of all loans row will show the years until all loans are repaid If this is greater than 40 years the undefined Total Loans dialog Clicking on the Total of all loans row title or double clicking on any of the values in the projections columns opens the Total Loans dialog For the start of each year shown this shows the cumulative number of investment properties included in the calculations the amount owing on the home loan the total of investment loans and the total loan balance Also include
181. row title or on any of the values in the projections columns opens the Annual amp Special Rental Expenses dialog This dialog allows the entry of any special expenses incurred from time to time that are best treated separately from normal indexed rental expenses see 3 11 PIA User Guide Page 74 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet 5 13 Living expenses row Rental expenses Living expenses New tax 4 00 5 621 5 846 6 080 6 576 8 001 4 00 30 950 32 188 33 476 36 207 44 052 5 940 6 859 8 807 12 370 22 421 The values in the projections columns of the Living expenses row are the predicted annual living expenses for the years of the projection These values are based on data entered in the Annual Living Expense Budget dialog Clicking on any of the values in the projections columns of the Living expenses row opens the Annual living expenses dialog see 4 11 Annual Living Expense Budget dialog Clicking on the Living expenses row title opens Annual Living Expense Budget dialog Here you can record all monies that need to be put aside for household living expenses These together with any home loan payments constitute the total non deductible expenses and need to be taken into account in calculating your capacity to purchase property Add remove and modify buttons You can modify or remove items or add new items by clicking on the Add Remove or Modify buttons or double clicking the
182. ry considerably Most lending institutions are conservative in calculating an investor s affordability such as ratio of the total loan payments to the sum of 30 of income and 80 of rent DSRs greater than 100 are unlikely to gain loan approval PIA User Guide Page 135 PIA Version 7 320 Appendix A Glossary Deemed payments Debt Service Ratio dialog Deemed payments are the financial institution s conservative estimate of future loan commitments allowing for example for an increase in interest rates Default folder The default folder in PIA is the folder in which you save or retrieve PIA files If you choose to save or retrieve files in a different folder that folder will then become the default folder Default template Box load a e oH cota vaes any new You can Po A own A nip oes vanes and nei in the Data Entry Chack Lel ses 2 4 You c can esel ia factory n with the Delete Default Tamplate command in the Settings menu see 7 6 Defined term This entry is for illustration only The hyperlinked term is shown on page 7 and links to this definition Demonstration version An unlicensed version of the software for evaluation purposes the demo version is of limited practical use as a number of key variables such as property value purchase costs and rental expenses are locked and cannot be changed by the user A demonstration version can be converted into a licensed version by entering the licensee name and registration cod
183. s in New Zealand refers to all items excluding the building that can depreciated for tax purposes The value in the input column on the spreadsheet shows the total value of furniture and fittings or chattels Initially the amount has a default value of 6 of the property price set at 6 but this can be overwritten in the Depreciation of Fittings dialog see below The values in the projection columns show the corresponding total annual depreciation write off for these items Depreciation of Fittings dialog Clicking on the Deprec of fittings row title opens the Depreciation of Fittings dialog which contains an itemised depreciation schedule and access to settings for how the depreciation is calculated in your situation Itemised Depreciation Schedule The Furniture package field shows the value if any entered in the Property Value dialog discussed in 3 2 You can change the names of any of the other items listing them individually Alternatively you can group them as General fittings Depreciation Preferences Depreciation is calculated using either the diminishing value method or the prime cost method The diminishing Depreciation of Fittings ltemised Depreciation Schedule Items Value Lite yrz General fittings E 150 Hot water sys 20 0 Motor mower fal Refrigerator 50 Stove 20 0 Low value pogl 3 000 40 Total 15 000
184. s including those in any portfolio you have created accumulated at any time and the spreadsheet analyses Whether you can afford them Whether a bank is likely to finance them Equity accumulation To function as a relatively simple and interactive tool the Wealth Builder spreadsheet assumes that any additional investment properties in the hypothetical portfolio are all derived from projected values of the property defined in the Investment Analysis spreadsheet If you wish to simulate the accumulation of different investment properties over time you should use the Create Portfolio Investor Menu see 7 4 to collate them The data number of properties rents loan payments etc from an existing portfolio will be added to the Wealth Builder but unlike additional properties can only be changed by recreating the portfolio It is recommended that you read Chapter 12 in Jan Somers More Wealth from Residential Property for a detailed example of using the PIA Wealth Builder to build a portfolio of investment properties The three key indicators that help to answer the question When can buy another investment property are e Cash savings e Loan value ratio LVR e Debt service ratio DSR Cash savings Cash savings is simply the accumulated difference between total income and total expenditure and if positive indicates that the investors can afford the loan This is simply an extension of the method used in the calculation of inve
185. s total debt over 25 y ears A summary table details property projections including number of properties value debt equity income expenditure and accumulated savings over 25 years This command is only available from the Wealth Builder spreadsheet 0 2 4 6 8 10 12 14 16 18 2 Year from purchase fe Total Equity HC Home Equity only PIA User Guide Page 104 PIA Version 7 320 Chapter 7 Menus and toolbars 7 5 Investor menu Clicking nvestor in the menu bar opens the nvestor menu This menu provides a number of options for entering investor specific data used in the spreadsheets and for generating investor related reports Personal Details Add Notes Current Taxable Income Current Investment Portfolio Tax Benefits Living Expenses Investment Capacity Maximise Wealth Builder Ctrl M Tax Variation Assets amp Liabilities Income amp Expenses Personal Details Clicking Personal Details in the Investor menu opens the Investor s Personal Details dialog allowing you to enter investor type and personal details If entered these items are displayed in reports The investor s personal details and Fructis Personal Detale any notes are stored in the property file with the property and finance data l Investor Type Investor Details Investor Type Person s Investor John Dough For the most part the investor will be Ad dees a person but it is also possible to Super Fund
186. s 715 356 706 345 696 586 Total of all values 880 000 932 800 988 768 Loan value ratio 81 76 70 674 571 601 412 1 111m 1 487m 61 40 The values in the projections columns of the Total of all values row show the predicted value of all properties including your home and any investment properties you have specified in an existing portfolio in the selected years The total value of all properties is the total value of all investment properties including any existing property portfolio plus the value of your home The total value is important in calculating the total loan value ratio when all properties are used as collateral for the loan Total Value dialog Clicking on the Total of all values row title or on any of the values in the projections columns opens the Total Value dialog This summarises the total value of all investment properties together with value of your home in the selected years Start of pear Existing portfolio Portholio value Total new properties New property value 400 000 Total inv prop value 400 000 Home value 480 000 Total of all values 880 000 Value at end of year 932 600 PIA User Guide Page 70 424 O00 424 000 BOS S00 932 800 309 768 449 440 449 440 539 328 988 768 1 04m 04 951 bfo fe 504 991 bo fae 605 389 010 950 Titim 1 48 m 1 178m PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Total of all values 880 000 932 800 988 768 1 111
187. s calculated by PIA as the actual annual rent expressed as percentage of the property value The Net yield is calculated as the net rental income actual annual rent less rental expenses expressed as a percentage of the property value PIA User Guide Page 49 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet This spreadsheet has several aims but the primary one is to provide a tool to help people examine ways of owning their own home sooner In contrast to an investment loan the interest on your own home loan is not tax deductible and thus paying off the loan as fast as possible usually makes financial sense For most property investors this is generally the first step towards building a portfolio of investment property as the increased equity in your own home provides very convenient collateral when you are looking for finance to purchase your first investment property In keeping with the primary focus of the spreadsheet the bottom line displays the remaining term of the loan at the bottom of the Input Column and the net cost per year which usually represents the annual loan repayments PIA assumes that the loan is of a principal and interest type with loan payments paid monthly in arrears fr File Edit Re ort Graphics Investor Calculator View settings Help John Dough for personal use only Home Loan Analysis put Projections over 10 years End of year O13 Tyr 2 WT JYT SYI 10T Home value 480 000 50880
188. s menu This report describes all of the assumptions made with respect to variables and gives the Current and Proposed scenarios that is with independent and linked loans for the home and investment loans Using and generating an investment surplus Investment properties with positive cash flows usually because the net rent exceeds the loan repayments will have surplus monies that can be used to help repay non deductible loans such as the home loan With negatively geared investment property negative gearing cash flows are generally negative that is the loan repayments exceed the net rent and tax credits In this situation there is not normally any investment surplus to use to help pay down the home loan However an investment surplus can be generated in theory at least by simply not paying the interest on the loan in the short term that is by adding it to the loan This is known as capitalising the interest This might even be done until the home loan is completely repaid In theory you can even capitalise expenses in a similar way These can be selected as items under the Settings Menu see 7 7 and via icons on the toolbar see 5 2 Each time you link or unlink the loans or select or deselect capitalization of interest or expenses PIA recalculates the term of the home loan By default PIA assumes that the capitalised component is not tax deductible However as it may under some circumstances be deductible t
189. s undefined the value shown is 125 822 104240 After sale equity Internal rate of return dialog see 7 7 In our example the Investment Analysis spreadsheet shows a projection over 10 years so the Rate of Return shown near the bottom of the input column is the Internal Rate of Return calculated over 10 years Note also that the inflation rate shows the value entered in the Inflation Rate dialog described in 3 8 To understand the Internal Rate of Return think of the money you are outlaying on your investment property as being deposited in a bank account with the interest added each year In this case the Deposits are represented as the after tax cash flows The total amount in your account including interest at the end of the period is the equity in the investment property The IRR represents the effective interest rate that you have received but with one important difference because the interest remains in the property it is not taxed The internal rate of return is also calculated and presented for the case where the property is sold and where selling costs and capital gains tax are taken into account PIA User Guide Page 46 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet 3 20 Pre tax equivalent row Rate of return IRR 15 27 Your cost income per week Pre tax equivalent 23 13 158 144 149 149 118 This item is related to the Internal Rate of Return IRR and is used for comparison with cash invest
190. sheet is the anticipated long term average annual rate of inflation In Australia this can be thought of as the rate of change in the Consumer Price Index CPI The values in the projection columns show the anticipated inflation rate for the individual years of the projection If you overwrite a value for the inflation rate in the nflation rate row of the Investment Analysis spreadsheet only that year is affected Inflation Rate dialog Clicking on the Inflation rate CPI row title or double clicking on any of the cells in the row opens the Inflation Rate dialog If you select and overwrite a value in the Inflation Rate dialog the inflation rate for all subsequent years is set to the new value Indexed Variables PIA uses the inflation rate to project rental income rental expenses Inflation Rate taxable income and living expenses These are referred to as indexed ear variables as their annual values Average Eh ah ah Ah ea are indexed to the rate of inflation CPI Rate 2 00 2 00 2 00 2 00 2 00 2 00 Use the toolbar scroll buttons gt gt gt lt lt lt to select the next Indexed Variables next five previous or previous five Indexed From Average Linked years Year Rate to CFI Indexed Rental income Tyr 2 00 If a variable is not indexed check box not checked it does not mean Property expenses Tyr 2 00 that the variable does not change It gt simply means that any change to its Ta
191. sis a those that describe the property b those that describe the finance and c those that describe the investor s Consumer Price Index CPI Investment Analysis spreadsheet An index of prices used as to measure of the rate of change in the cost of basic goods and services i e the inflation rate Cost base Capital Gains Tax Calculator and reports Used in calculations for capital gains tax cost base is the total purchase price of a property including the costs of acquisition stamp duty renovations etc Credit line various spreadsheets A type of loan account into which all income is paid and from which all expenses are redrawn Used to accelerate mortgage reduction Current net income Current Taxable Income dialog Your current net income is simply the total of all your income salary wages rental income from any investment properties that you currently own and income from any other source including any tax rebates less your total cash expenses Current taxable income Current Taxable Income dialog Ca properties that you currently own and income from any other source less your total allowable tax deductions cash expenses and depreciation claims Debt service ratio DSR Wealth Builder spreadsheet The debt service ratio provides a guide as to the level of affordability of a loan As it is defined within PIA the value should be below 100 The methods that lending institutions use to calculate this index va
192. spreadsheet Chapter 4 Home Loan Analysis spreadsheet Systematic description of each Chapter 5 Wealth Builder spreadsheet spreadsheet Chapter 6 Linked Loans spreadsheet Chapter 7 Menus and toolbars Systematic description of menus and toolbars Appendix A Glossary Definitions of investment and PIA terms Appendix B List of dialogs Quick access to dialogs and their descriptions Appendix C Abbreviations Abbreviations used in PIA interface and filenames Index Find text based on keywords As a principle information is documented once only and cross referenced For example the Loan Costs dialog can be accessed in 3 different ways from the Investment Analysis spreadsheet but is only documented fully in one place see 3 15 Getting best results in Acrobat Reader A limitation of Acrobat means that screenshots from Microsoft WORD are not rendered with 100 accuracy Best results are obtained with the magnification set to 134 or 192 This Acrobat file has been set to a default magnification of 134 PIA User Guide Page 1 PIA Version 7 320 Chapter 1 Welcome to PIA 1 1 Overview of PIA structure Spreadsheets PIA comprises four separate spreadsheets Investment Analysis Home Loan Analysis Wealth Builder and Linked Loans for providing instant feedback for a wide range of what if analyses A single PIA file contains the data for all four spreadsheets Dialogs There are over 100 different dialogs supporting these spreadsheets Their purpose r
193. stment capacity see also 7 4 which refers to the amount of investment property that an investor or a couple can afford after setting aside sufficient funds to cover their normal living expenses In this spreadsheet cash savings are accumulated from year to year and naturally total expenditure which includes taxes living expenses rental expenses and any loan payments in any year should not exceed the monies available i e accumulated savings up to that year plus total salaries rental and other income for that year Loan value ratio LVR The LVR is used by banks as a measure of your loan security and is calculated as total monies borrowed including the new loan divided by the total value of assets being used as security for the loans As a general guide the LVR should definitely not exceed 100 and preferably should not exceed 80 loans with higher LVRs would likely attract mortgage insurance Debt service ratio DSR The DSR is used by banks as a measure of your ability to service the loan and is calculated as a function of total debt repayments compared to total income including rental income The method that lending institutions use to calculate this index varies considerably Generally only a percentage of income is deemed eligible as a guide it is 30 of salary plus about 80 of gross rents and loan payments are often deemed higher than actual to allow for a potentially higher interest rate during the course of repayments The
194. stment Equity dialog This shows the relationship between property value total value and total loan and hence the equity for the selected years It also shows the present value of the projected equity that is in today s dollars and the after tax cash flow for each of the years End of pear Properties Property value Investment value Investment loans Investment equity Equity today s After tax cash Flow 424 000 424 000 379 396 44 b44 42 Jar 0 205 449 440 449 440 379 356 70 084 64 797 7480 475 406 476 406 379 396 ar 05 oE Ara 4D Bag 535 290 379396 155 935 128 167 FF ab r16 333 T16 339 3f4 356 336 03 eer bod 6 114 Note that if the property is sold not recommended in the short term the full value of the equity will not be realised Selling costs sales commission and solicitor s fees and any capital gains tax must be deducted PIA User Guide Page 83 PIA Version 7 320 Chapter 6 Linked Loans spreadsheet This chapter provides an overview of the Linked Loans spreadsheet and its related dialogs The term linked loans refers to the fact that the spreadsheet displays details for both investment and home loans and examines the impact of links between the two The main role of this spreadsheet is to provide a fast and easy way of analysing accelerated loan reduction especially for the home loan As a result of the different tax status of ho
195. stment Growth PIA User Guide Page 103 PIA Version 7 320 Chapter 7 Menus and toolbars Investment Loan Payments Clicking Investment Loan Payments generates and displays the Investment Loan momo maA Payments graphics report with a gr aph and table of investment loan interest and payments over 25 years 15000 If the investment loan is interest only the loan payment is the interest only If the rr investment loan is principal amp interest the loan repayment remains constant but the interest drops as the loan is gradually repaid 5 00 Home Loan Payments EOE Clicking Home Loan Payments generates and displays the Home Loan Payments graphics report with a graph and table of home loan interest and payments over 25 years is 10 000 5 000 0 2 4 6 8 10 12 14 16 18 20 Year from purchase ESEJ LoanPayments EE Interest Home amp Investment Loan Balances PR Clicking Home and Inv Loan Balances generates and displays the Loan Balances graphics report with a graph showing the home amp investment loan balances over time the period usually for the remaining term of the home loan A summary table shows interest accrued loan payments and loan balance for both home and investment property loans 100 000 over 25 years 0 T 4 6 2 10 12 14 16 1 Year from purchase fy Investmentloan EJ Homeloan Combined Loan Value Ratios Clicking Combined Loan Value Ratios generates and displays the Combined Loan Value w Cowhined
196. t Investment Property Cash Flows Cash Flows Clicking Cash Flows generates and displays the Investment Property Cash Flows graphics report with a graph of investment property cash flows over 25 years contrasting 1004111111111111 4n before and after tax cash flows l A summary table shows projections over 25 years including projected rental income loan payments rental expenses pre tax cash flow tax credits and after tax cash flows z T i 0 5 10 15 20 25 30 35 Year from purchase Pre tax HSC nerta Rate of Return S Investment Property Internal Rate of Return Clicking Rate of Return generates and displays the Investment Property Internal Rate of Return graphics report with a graph of projected equity in the property over 25 years for the two scenarios if the property is kept and if the property is sold A summary table details after tax cash flow equity and rate of return on the property for two scenarios if the property is kept and if the property is sold 0 5 10 15 20 25 Year from purchase J Ifkept HE if sold PIA User Guide Page 102 PIA Version 7 320 Chapter 7 Menus and toolbars Rental Yields Clicking Rental Yields generates and displays the Capital growth amp Net Yield report 6 Capital Growth amp Net Yield 20 00 7 2 222 222 ence eee e ence noes eee c cece cece cc eee eee c ee with a graph showing rate of growth net yield and net return growth net yield over the first 25 years of t
197. t cash flow report that is in a format required by most financial institutions for investment loan applications Lenders use this information to determine whether you have sufficient capacity to service the loan They do this by calculating a Debt Service Ratio DSR However not all income amp expense items are used in the calculations and those that are may be used in different ways For example a lender may consider 30 of wages and 80 of rental income to be used in the calculations but may not consider welfare payments to be eligible at all Living expenses may or may not be used in DSR calculations as most lenders have a pre set formula for estimating living expenses based on your family s size and age There are associated DSR buttons for each item that enable you to define the appropriate category e g wages rent etc and whether it is used or not in the DSR calculation PIA User Guide Chapter 7 Menus and toolbars Assets amp Liabilities 7 mE Investment properties 3 n ai a x a m i wy ai x a a m zj Home loan 252 000 ji V Investment property loans 285 469 wt argin loans i Other investment loans Personal loans D Hepa 0 Business loans 0 0 0 Credit card debt 0 0 0 Funen 0 B a Ga Income amp Expenses Page 112 m Rental expenses 4 411 E Home loan payments 24 al Investment loan payments 19 98
198. t column in the Total loans row reflects the total loan balance for your home and any existing property investment portfolio at the start of the initial year The values in the projections columns reflect the end of year total loan values for each of the selected years Total Loans dialog Clicking on the Total loans row title or on any of the projections columns opens the Total Loans dialog see 6 6 This shows the derivation of the values in the projection columns and the start of year and end of year values PIA User Guide Page 81 PIA Version 7 320 Chapter 5 Wealth Builder spreadsheet Total loans 336 000 706 345 696 586 686 017 662 175 582 944 Net worth 184 000 230 866 303 136 380 798 554 373 1 113m Investment equity 15 27 44 644 70 084 97 051 155 935 336 983 The value in the input column in the Net worth row is your net worth for the initial year This includes the equity in your own home The values in the projections columns reflect your projected net worth for the selected years Your net worth is the total value of all property assets including the family home less the amount of outstanding loans Net Worth dialog Clicking on the Net worth row title or on any of the projections columns opens the Net Worth dialog This shows the derivation of the projected net worth from the total value total loans and cash savings for each of the selected years The net worth for each of the years selected is also given in today s Y
199. t commands in the Report menu is described below Not all reports are available in all spreadsheets reports that are not currently Home Loan Analysis available are dimmed The content of each report reflects the various options chosen for PIA Wealth Builder Analysis A report is a different view of PIA data It is not a separate window For this reason to return to the spreadsheet you were previously viewing you must select the appropriate spreadsheet from the toolbar or the simplest way press the ESC key The Customised Report option described below allows you to combine various report components in a single document Investment Analysis Descriptive 40 Year Projections Linked Loan Analysis Capital Gains Tax Customised Report Cash Flow Analysis report Clicking Cash Flow Analysis generates and displays the seven page Property Cash Flow Analysis report This shows the derivation of the after tax cash flow for the selected property The first part of the report gives a tabulated breakdown of all the items that contribute to the cash flow in the first year of the investment The later parts of the report show the cash flow projections over time Investment Analysis report Clicking Investment Analysis generates and displays a detailed report of the cash flow analysis and anticipated internal rate of return IRR for the current investment property The report begins with the summary report of the variab
200. t row titles on the left no longer change colour and the mouse cursor does not change shape when the mouse pointer passes over them This option has been made available because of possible conflicts in some operating systems Wealth Builder display option If the Show loan term checkbox is ticked the Wealth Builder spreadsheet will calculate the years until all loans are repaid and display it in the input column of the Total all loans row If the number of years exceeds 40 the figure will display as File Locations tab Clicking the File Locations tab displays the currently specified folders for storage of files Clicking the Modify button displays the Select Directory dialog allowing you to select the directory where files will be stored See also 7 1 If you use the Save As command or Open Preferences command to save or open a file in a directory other than the default directory Parone Ween M a e PIA stores this as the default directory This Display File Locations Magnification Colours Currency information is updated whenever you open or save a file but can also be specified File Type Folder directly using this dialog Documents C Usere Van Work PIA PIATS Help Components C Program Files Somerset PIAPro Magnification tab Clicking the Magnification tab in the Preferences dialog opens the Magnification page You may enter the required magnification directly in to the Specify percentage line pa Clicking the Default b
201. the Annual Living Expense Budget dialog see 6 13 Clicking the Report button in the dialog generates a Summary report of annual living expenses This report can also be generated by clicking Living Expenses in the Report menu PIA User Guide Page 108 PIA Version 7 320 Chapter 7 Menus and toolbars Investment Capacity Clicking Investment Capacity opens the Investment Capacity Investment Capacity aig drone 1 et Yeal AA Expenses 1st Year dialog This dialog a Total non property income Hew tax investor 3 693 offers a facility for determining a couple s Curent rental income Mew tax partner EREN fi investment capacity as Curent assessable income Rental expenses 5 62 Meaewies py now semis Nor taxable income Inv loan interest 31 4856 investment properties TE like the one in the lesz Curent cash expenses Inv loan principal 0 a Current net income 95 000 Home loan pamere 35 565 they ne Sed Hew rental income 17 836 Living expenses 30 950 The dialog shows the Total income 112 836 Total expenses 103 563 cash flows in year 1 of rr te the investment taking yp MWhership eae z home loan payments Proportional Ownership Investment properties 1 living expenses and tax f Single name Investor 100 00 ETES 112 836 benefits into account Cjo Pire Tatal l 109 563 To determine your ant names ana 0 00 otal expenses investment capacity increase the num
202. the Contents Index and Search tabs The Contents tab displays the contents of PIA Help The Index tab displays an index of PIA Help The Search tab presents a search window allowing you to search on keywords to find the help you are looking for Instructions on how to use the Help Topics are clearly given under each of the options k Help Topics can also be accessed through the Help icon on the toolbar E PIA 7 2 Help Hide Home aiy Contents lndex Search ls i Introduction HAE out PIA 7 Interface Data Entry Check List m amp Investment Analysis Spreads _ Home Loan Analysis Spread Wealth Builder Spreadsheet T Linked Loan Spreadsheet m Menus Special Topics Trouble Shooting m Tutorials Toolbar items S PIA User Guide int Options Page 132 About PIA Welcome to PIA Property Investment Analysis a powerful program designed to make it easy for investors to analyse and evaluate prospective property Investments FIA helps you analyse the capital growth cash flaws and rates of return on investment properties taking tax Implications into account It is simple to use and as a decision tool provides the answers to a long list of What ifs on property investment PIA is an analysis tool itis not an accounting tool Cin the market since 1964 PIA has PIA Version 7 320 Chapter 7 Menus and toolbars Register Clicking Register opens the
203. the Tax Variation Application dialog The dialog helps you the investor calculate your adjusted tax liability for the remainder of the financial year if you were to purchase the investment property described in the Investment Analysis spreadsheet Once you are happy with the figures in the dialog you can generate a Tax Variation report by clicking the Report button Financial Details These include the date from which adjustment MERS Tari atypmveneltien ay of tax instalments is to take effect the Financial Details investor s annual 2004 2005 Salary Tax Pap Frequency 3 salary and the Daele Annual 60 000 15 312 C Monthy C Two monthly frequency of salary ate for Po G eee payments The adjustment Per pay 2 308 589 Fortnightly Twice monthly financial year is a ae CO Bene fo a m i 2005 Todate 30000 zess lt Weep C Fourweekly specified date of EEE adjustment while the Propery Detik starting date of the Investment Property Annual 2004 7 2005 Current Total financial year is country dependent 1 July in Australia 1 April in New Zealand sf p r a ent iin Ownership 100 00 Expenses 4 41 2 067 2 411 sar instalments per pay Portion 20047 2005 46 85 Non cash 7 336 3 437 4 Wee r459 and the total tax E Nepales ie hi m Assessable Income Allowable Deductions Projected T as Liabilities e date of adjustmen een m suaaar oun ate Salary 60 000 Work related 0 Annual tax liability 9 153 d
204. the end of the projection period selected in the Investment Analysis spreadsheet To change the projection period see 3 1 Set Projections Customised report Clicking Customised Report opens the Customise Investment Report dialog This dialog allows you to generate a customised report composed of various report components including graphics pages The customised report options will be retained for the next time you wish to use this item Page header This pull down menu allows you to choose the page header for your customised report The page header appears on the Hone Licensee s name Client s name Property address Property description Report subheading Header test specify below second and subsequent pages of a report Page header text This box is used to specify the text when customising the page header Report heading This box is used to specify the name when customising the report heading Report sub heading This box allows you to enter text to be displayed underneath the page header on each page of the report Report options The options are largely self explanatory and include the reports described above Clicking in the tickbox next to an item selects it for the customised report Customise Investment Report Page header Page header text Report heading Report sub heading M Investment Analysis M Summar page O Tabulated or O Descriptive Additional Pages Tas benefits
205. the same year with the Amount owing to be set accordingly You may however simulate your home loan from the year it was originally obtained but you should be aware that information you record for the investment property may not synchronise with the home loan and is probably best kept as a separate file The values in the projection columns specify the years for which projected values are displayed The maximum value is 40 years A value of zero results in no information displayed in that column The years do not need to be consecutive or even in chronological sequence To change any year simply select the particular cell and overtype it Note however that if you change a year PIA changes it in all spreadsheets Set Projections dialog Clicking on the Year row title opens the Set Projections dialog allowing you to select the range of years displayed For details about setting projections please see 3 1 You can also overwrite the values in the Year row projections columns PIA User Guide Page 51 PIA Version 7 320 Chapter 4 Home Loan Analysis spreadsheet 4 2 Principal residence row End of year 2013 1yr 2yr 3yr 5yr 10yr Home value 480 000 508 800 539 328 571 688 642 348 859 607 Capital growth rate 6 00 6 00 6 00 6 00 6 00 6 00 The value in the input column of the Principal residence row represents the value of your home for the year specified above The values in the projection columns show the anticipated increase in the
206. this point in time it is denoted as End of year Property price Property Value In most cases the price paid for the property defines the i Property Yalue property s value and determines the amount of End of pear 23 Tyr Ayr dur Sut State government stamp duty Property Price 400 000 payable Clicking on this button will provide options for Renovations 0 U U 0 0 0 the property being a house Book value 400 000 and land package whereby the stamp duty can be calculated Market value 400 000 424 000 449 440 476 406 504 991 535 290 on the land value only Holding costs Oo Renovations i Furniture package 0 If renovations are carried out immediately after purchase this impacts upon the property Property Details Linked to Property Price value and its potential for capital growth but does not Addess i Value of fittings affect any stamp duty paid on iW Construction cost the original purchase price Description I Stamp duty You may enter renovation costs in the initial column at time of purchase or in Annual Growth Rates subsequent years Book value The_book value is the sum of the purchase price plus the cost of any renovations undertaken at the time of purchase Market value If you consider that the true market value of the property differs from the book value you can specify the market value independently The values shown to the right of the initial market value refle
207. to both the software and the information herein and these changes will be incorporated into later editions Materials and examples contained herein do not constitute financial advice as there may be many issues outside the realm of this software and publication that should be considered in making or modifying an investment Warranty Somerset warrants that the medium on which this software is furnished to be free from defects for a period of 90 days after delivery Somerset does not warrant that the functions contained in the software will meet your requirements or that the software operation will be error free In no event will Somerset be liable to you for any damages including any lost profits lost savings or other incidental or consequential damages arising out of the use or inability to use this program or for any claim by any other party The entire risk as to the results and performance of the PIA program and documentation is assumed by you Help Before contacting technical support support somersoft com au please review the PIA Quick Start Guide and this user guide Help is also available within PIA via the He p menu and via the buttons in dialogs The PIA website provides access to Frequently Asked Questions FAQs with answers Discussion group for property investors Updates as they are released Free subscription to the email update notification service www somersoft com au Caveat Dear PIA User This edition of the PIA
208. ty scale However there are circumstances for example when you are building after purchasing land and building an investment property where you may wish to calculate it separately and overwrite the value To do this select the Stamp Duty Calculator from the Calculator menu see 7 5 Stamp Duty Scales In Australia stamp duty is a state levied tax on the transfer of real property If you tick the check box for your state PIA recalculates the stamp duty from the specified scale for the state Reset scales The stamp duty scales vary according to the state or territory and can be set in the Purchase Costs dialog by clicking on the Reset Scales button This opens the Specify Stamp Duty Scale dialog In the example shown the Queensland scales are in use PIA User Guide Page 21 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Specify Stamp Duty Scale dialog Checking the Default check box selects the current stamp duty scale as the default scale meaning that whenever you create a new property file the current stamp duty is the one used Any of the graduated scales may also be edited or set as a flat rate that is where the stamp duty is calculated based on the total property price times the specified rate Any changes made to the stamp duty scale are saved in the PIA settings file when you quit PIA Clicking the Other radio button allows you to enter and save a customized stamp duty scale starting from scratch In Victoria g
209. u Many items will have been reviewed in earlier chapters Where this is the case a cross reference is given PIA User Guide Page 94 PIA Version 7 320 7 41 File menu Clicking File in the menu bar opens the File menu The File menu contains commands for opening saving and deleting files as well as for page and printer setup and printing There are additional items in the PIAPro version for saving and retrieving property finance and investor components see description below New Clicking New opens the Data Entry Check List dialog which enables you to enter data for a new property file see 2 4 If you have specified not to display the Data Entry Check List see 2 4 the new file will open with the investment analysis spreadsheet The new file contains the values specified in the default template see 7 7 Open Clicking Open opens a dialog that allows you to open an existing document The Open dialog shows the default folder The default folder presented when you click to open a file is the folder you last opened a file from or last saved a file to The original default folder before you have saved any files differs depending on the operating system Save If the current file has already been saved indicated by a filename in the title bar clicking Save saves the current document If no changes have been made since it was saved the Save menu item is dimmed If the file has not yet been saved indicated b
210. u may also be paying an additional amount per month or even making irregular one off payments see 4 8 4 9 See 3 1 for details on how to set projections Home Loan Balance PIA User Guide Year Initial loan balance M Loan Additions Interest added Regular redraws iregular redraws Total Loan Payments Regular payment Regular extra Total Closing balance Page 62 Irregular extra Tyr 336 000 26 554 359 969 326 989 elt WT 326 969 317 230 25 006 24 956 20 805 24 996 35 565 35 5655 35 565 35 565 a17 230 306 661 Fit 295 215 23 169 23 169 35 565 35 565 202 019 PIA Version 7 320 T yr 222 057 17 097 35 565 203 588 Chapter 4 Home Loan Analysis spreadsheet Loan balance 336 000 326 989 317 230 306 661 282 819 203 588 Loan value ratio 70 00 Your net cost per year Term remaining 17 7yr 35 565 35 565 35 565 35 565 35 565 The loan value ratio is the ratio of the loan to the value of the property It is an index used by lenders as a measure of risk in lending you the money For example it is common for lenders to charge for mortgage insurance if the loan to value ratio exceed 80 The figure in the input column on the Loan value ratio row is the current loan value ratio Home Loan Value Ratio dialog Clicking on the Loan value ratio row title or on the value in the input column opens the Home Loan value ratio d
211. uide Chapter 7 Menus and toolbars Disclaimer PIAPro has a standard disclaimer which cannot be edited You can however append text to the Disclaimer standard disclaimer Clicking Disclaimer in the Settings menu opens Additianal Text the Disclaimer dialog This allows you to make additions to the standard disclaimer used in reports generated by the Professional version of PIA You can add additional phrases and change the style and format of the disclaimer Changes to the format affect the entire disclaimer that is the standard disclaimer and any additions you make wits servants employees or consultants This is where you can make your additions to the standard disclaim Font Style Alignment and Margins You can set the font style alignment of text and the width of the left and right margins to allow space for a company logo The entries in the Left Alignment and Right boxes determine how far from the left of z j Left Left 0 00 C Centre the page the margins will start C Right Right 3 00 i When you click on OK a window is displayed showing the disclaimer as it will be printed The edited disclaimer is stored in the settings file and appears on all subsequent documents printed Press the ESC key to return to the spreadsheet This example shows the format set to italic left justified text _ 30 Gay Drive Cleveland pia Somerset Pla Fie Report Graphics Investor Calculator Mew settings
212. unt owing Home Loan Analysis spreadsheet The amount still owing on your home loan or a consolidation of non investment loans Assessable income Current Taxable Income dialog Assessable income includes salary wages rental income from any existing investment properties and any other income Book value Property Value dialog is what you might expect to get for it if you were to sell it 0 Capital allowance Depreciation of Building dialog This is another term used for the depreciation claim on the building Capital cost Investment in the asset rather than expenditure on operating or revenue costs Capital Gains Tax A tax on the net profit between purchase and sale Capital growth rate Investment Analysis spreadsheet The average annual compound rate of growth in the property value Cash flow The monies that flow in and out of your pocket Cash neutral investment The initial deposit required to make the after tax cash flow in the first year equal to zero In the Property Details area of the Investment Analysis spreadsheet this variable is shown as 0 if the investment is already cash positive when there is no deposit Cash savings Wealth Builder spreadsheet Cash savings represent the accumulated monies available after all income and expenditure is taken into account Component PIAPro File menu A component is a subset of a PIA file that describes one of the three major sets of attributes required for investment analy
213. ur investments and your equity at the end of the period Internal Rate of Return dialog Clicking on the Rate of return IRR row title opens the Internal Rate of Return dialog Internal Rate of Return ear Total investment This shows the total amount adjusted by inflation to convert it to today s dollars invested by you over the Cash Flow Today s projected period Initial investment 30 000 30 000 Equity at end yr 32 3 7 94 This shows your equity in the property at the end of Aut 3401 3301 the term both in nominal and today s dollars p sis dyr 3 618 3 445 Net present value NPV Syr 3703 3300 The Net Present Value NPV represents the total value of your investment less the total cash that you have invested all adjusted to today s dollars Cyr AF otal investment 3 478 2 B82 63 526 149 474 85 949 13 36 Equity at end 180 422 Real Return This shows the effective interest on your investment that is the after tax after inflation rate of return This measure takes into account the buying power of the Het present value Internal rate of return money made The year displayed in the right most column of the Investment Analysis spreadsheet determines the Inflation rate Real return If Sold 2 00 11 142 range of years over which the Internal Rate of Return is calculated This can be changed in the Projections Displayed dialog described in 3 1 If the Real return i
214. utton resets the Specty percentage magnification to the default calculated by PIA based on the resolution of your graphics card This default setting ensures that the screen is always readable when the software is first installed Preferences Display File Locations Magnification Colours Currency You can magnify the view of the spreadsheets and reports without affecting printed output The standard view is 100 magnification A magnification of 150 results in a view that is 50 larger than the Standard while a view of 50 results in a view 50 smaller than the standard PIA User Guide Colours tab Clicking the Colours tab opens the Colours page in which you can specify custom colours for various parts of the user interface Clicking on the various buttons in the page opens the operating system s Colour selection dialog see below After selecting a colour the colour of the button is updated accordingly Clicking the Defaults button returns the colours to the PIA default settings Background Colours refer to those of the spreadsheets Two of the spreadsheets Linked Loans and Wealth Builder can be divided logically into an upper and lower part for which different colours can be chosen to make interpretation easier Text Cell Colours refer to the foreground colour of text in the various spreadsheet cells Active cells are those that can be selected and overwritten Inactive cells are those that can t be overwritt
215. which the Internal Rate of Return is calculated PIA User Guide Page 12 PIA Version 7 320 Chapter 2 The User Interface The scroll icons in the Toolbar allow you to scroll through the years While PIA calculates projections up to 40 years only 5 years are shown at any time By default these are the years 1 2 3 5 and 10 The bottom line The bottom rows of the spreadsheet represent your bottom line The figures for values such as Rate of return and Pre tax equivalent are based on the period displayed in the projections columns License header At the top of the spreadsheet area is the license header This shows the licensee and the type of license The examples shown in this User Guide show John Dough for personal use only indicating that the software is a single user version licensed to John Dough Column headers The column headers identify the input column and the projections columns The title above the projections columns indicates the span of the projection here Projections over 10 years For full details of the spreadsheets please see the appropriate chapter Chapter 3 Investment Analysis spreadsheet Chapter 4 Home Loan Analysis spreadsheet Chapter 5 Wealth Builder spreadsheet Chapter 6 Linked Loans spreadsheet PIA User Guide Page 13 PIA Version 7 320 Chapter 2 The User Interface 2 7 Dialogs Dialogs allow you to view and in some cases edit the variables that make up or determine an item
216. x Scale 124 Stamp Duty Calculator 115 Structure of the Linked Loans spreadsheet 87 Superannuation Calculator 121 Tax Benefits 78 Tax Credits 43 Tax Variation Application 111 Total Annual Net Cost 94 Total Loan Value Ratio 93 Total Loans 70 Total Tax Deductions 42 Total Value 71 Wealth Builder spreadsheet 67 Wealth Maximizer 111 Welcome 7 Whoops 6 Window and sizing 16 Page 140 PIA Version 7 320 Appendix C Abbreviations c d CL CGT CPI DSR FIN INV I O IRR LVR np NPV pf P amp I PIA PIA PIAFpu PIAPro PRP SET Indicates that amounts in this row have been capitalised i e borrowed Indicates that the amounts in this row have been used to repay debt Credit Line Capital Gains Tax Consumer Price Index Debt Service Ratio Finance component file extension Investor component file extension Interest only loan Internal Rate of Return Loan Value Ratio Indicates non property Net Present Value Existing portfolio included in Total inv properties Principal amp interest loan PIA property file extension Property Investment Analysis PIA Investor version for personal use PIA Professional version for professional use Property component file extension Settings file extension PIA User Guide Page 141 Appendix C Abbreviations PIA Version 7 320
217. xable income Tyr 2 Os value in one year has no effect on e m os its value in later years Living experises lyr 2 00 If a value is not indexed all changes to that variable s annual values must be made by selecting the variable either in the a lt gt gt Ok Cancel appropriate dialog or in the spreadsheet row and overwriting it From Year When the Indexed check box is checked the From Year field specifies the year from which the variable is indexed Earlier annual values remain static in their current state and can only be changed by selecting and overwriting Average Rate This is the annual rate of inflation used to project the variable forward from the specified year This may or may not be the same rate as the CPI Linked to CPI If the variable is linked to the CPI the Average Rate is always set to the CPI rate that is a change in the CPI rate results in the same change to that average rate for the variable However if you specify an Average Rate for the variable different to that of the CPI rate it is no longer linked to changes in the CPI rate check box not checked If direct changes are made to any of the annual variables for rents rental expenses taxable income or living expenses it is assumed that the variable is no longer inflation indexed up to that year The variable is still inflation indexed for the remaining years of the 40 year projections PIA User Guide Page 30 PIA Version 7 32
218. y Untitled in the title Chapter 7 Menus and toolbars New Open Save Save S Save Report s Delete Revert Load Image of Property eMail File eMail Report Page Setup Print Frink Preview Print Setup 1 FIA User Guide Example PIA 2 Untitledso FIA 3 Raby Bay Gardense pia 46 Downey as rental pia Exit Ctri h Ctrl o Ctrl 5 Ctrl D Ctrl R Ctrl F bar clicking Save opens the Save As dialog allowing you to enter a filename and optionally select or create a folder to save to It is recommended that you create a special folder to hold your PIA files This can be done with the Save As dialog using the navigation features and the Create New Folder icon This becomes the default folder from which to open or save PIA files and makes it easier to locate and back up files Up One Level Save As Save in gt PlaFpu t e Ez PIA User Guide Page 95 Create New Folder PIA Version 7 320 Chapter 7 Menus and toolbars Save As Clicking Save As opens the Save As dialog allowing you to save an a opened document under a new aes filename and optionally in a different 58e in gt PIAFpu e cf EE folder The folder in which the file is 7 saved becomes the default folder Save As Save Report As If a report screen is currently displayed after using one of the Report menu commands see 7 2 clicking Save Report As o
219. y Calculator Incoming Income 4 Investor Partner Rental income Other Tota 128 620 Outgaings Eligible Income 30 000 Loan A Loan B Credit cards 570i 66 T Other 43 3596 Total Repayments Monthly 1 160 Annual 13320 1136 13 630 250 3000 of a 246 30 549 Loan Eligibilty 43396 30 544 12 847 r040 Total incoming Total outgoings e a oe lncomings outgoings Debt Service A atio PIA User Guide Page 118 PIA Version 7 320 Chapter 7 Menus and toolbars Loan Refinance Calculator Clicking Loan Refinance opens the Loan Refinance Calculator The calculator demonstrates the impact on monthly Loan Refinance Calculator payments of refinancing Refinancing may also be Loans Curentloans Refinance Investment Total Combined undertaken in conjunction property loans loan with the financing of an Amount owing 292 000 252 000 investment property in which i case the impact on the Refinance costs T monthly after tax cost is also i shown Loan amount 288 000 252 000 285 469 537 469 537 469 Clicking the Current loans Asset value 30 30000 300 000 660 000 660 000 button opens the Loan Consolidation Calculator see Loan value ratio z a FUL ifs appear al 4z al es 4 5 This allows you to Loan type Pe io vo specify a range of non deductible loans that are to Loan term 2030 2045 2045 be consolidated and z 5 z Seni Loan rate PANIA
220. y Tax Scale dialog This Specify Tax Scale dialog allows you to reset the tax scales used rome i pj Uptions in PIA 0 00 f Australia The default setting is the country you chose 6 O01 15 00 in the Set Country Defaults dialog C Mew Zealand If you make a change to the tax scales these 37 001 30 00 C Other scale are saved to the PIA settings file 50 001 37 Oe A There is an option for quarantining any tax losses to the investment i e they cannot be 180 001 l Quarantine losses offset against other income such as salary M Em 37 000 e000 an r Low Income Tas Offset T Medicare Levy Threshold 18 485 Reduction above threshold 400 Rate 1 50 Cancel Maximum tax offset Threshold ddd Lla Selling Costs Clicking on Selling Costs opens the Selling Costs dialog 3 This dialog allows you to enter values for PIA to use selling Costs when calculating the cost of selling a property These include sales commission solicitor s fees and in Estimated costs based on a selling pice ot 465 891 Australia Capital Gains Tax The sale of properties in New South Wales also attracts Cost Component of Sale Price Cost 4 stamp duty on sale Sales Commission Solicitors fees Stamp duty on sale Other selling costs Capital Gains Tax Total selling costs 54 600 afm oot PIA User Guide Page 124 PIA Version 7 320 NRAS Options Clicking
221. y payments toward the principal Interest and expenses are not included in the cash flows if they are capitalised in the loan Likewise rents will not be included if they are used to directly reduce the loan Pre tax equivalent of IRR The Pre Tax Equivalent of the Internal Rate of Return provides a useful comparison with cash investments as this is the interest rate that you would need to achieve from a bank to get the same after tax return Any such interest would be taxed at your top marginal rate This is not to be confused with the Pre Tax Internal Rate of Return which is the return calculated on your pre tax cash flows Pre tax Internal Rate of Return The IRR calculated on your pre tax cash flows Principal The amount that you borrow from the lender It is the capital amount upon which interest is payable Principal amp Interest P amp I loan A loan type where payments include both interest and principal components reducing the balance of the loan to zero at the end of the term Contrast interest only loan Principal residence This is the investor s own home also known as Principal Place of Residence PPOR Program directory This is the directory folder containing the PIA program files It is recommended that you create your own directory folder for storage of your property files see 7 1 Property file PIA saves all data relevant to the analysis of an individual property in a separate property file This has the f
222. yments on linked non deductible home or personal loans refer to Taxation Ruling TR 1998 22 and its Addendum TR 1998 22A August 2004 which is available at Tax Offices or via the Internet at www ato gov au You should consult your accountant or the Taxation Office to determine the tax status in your situation Credit Line For a credit line all available monies are deposited in the loan including salaries etc and personal living expenses are drawn from it Normally this means that additional principal contributions are made in addition to regular principal amp interest payments This accelerates mortgage reduction for this loan type PIA User Guide Page 33 PIA Version 7 320 Chapter 3 Investment Analysis spreadsheet Split loans Loan B The loan can be split into two separate components Loan A and Loan B with different loan types and interest rates Naturally the total of the two loans equals the Total Loan Split rates Rate A amp B The Loan Type checkbox provides an option to have split loans two loans Loan A and Loan B or split rates one loan with two rates Rate A and Rate B If the checkbox is ticked the total rate of interest is the sum of each rate in each year which in turn are specified in the Annual Rates dialog If the checkbox is unticked the total loan amount is the sum of the loan amounts for the two loans See hitp vwww somersoft com au split_rate_loan htm for an example Annual Interest Rates dialog Cl
223. your support request in the body of the email before sending the email gt Because of operating system restrictions the Support Online feature is only available in Windows where MAPI support is available About PIA Clicking About PIA opens the About PIA dialog It shows copyright information the address of Somerset Financial Services the website URL and the email address for support The Registration field Reg at the bottom of the window shows the first 4 characters phous of the registration code and the corresponding month year when it was first registered g PlAtnvestor Version Yro edtn 01 2 You can also open this box by all Copyright 1989 2011 Somerset Financial Services Pty Ltd clicking the About PIA icon on the Pod Eos 615 tonar Cleveland Old 4163 Australia Web site www somersott com au Email supporttsomersoth com au This product ts licensed to John Dough tor personal use only Registered LDOFW 04 2013 File Version W7 o0 PIA User Guide Page 134 PIA Version 7 320 Appendix A Glossary After tax cash flow Investment Analysis spreadsheet These are all of the monies that flow into or out of your pocket after tax is taken into account Allowable deductions Current Taxable Income dialog Allowable deductions consist of those expenses that relate to your work related income and those expenses and depreciation claims that relate to your rental income from your investment properties Amo

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