How to do a feasibility on an investment property

A feasibility is the set of numbers you run before you buy: the total cost to buy, the rent and yield, the holding costs, the cashflow, depreciation and tax, then a stress test. Here is each step, with a worked example from one of our own purchases.

What is a feasibility on an investment property?

A feasibility is the set of numbers you run before you buy, to check the property works for you: what it costs to buy, what it earns, what it costs to hold, and how much you need to fund each month. It turns a property you like into a decision you can defend.

Run it before you make an offer, and run it again with worse assumptions. If the property only works when everything goes right, it does not work.

Step 1: Work out the total cost to buy

• Purchase price.
• Stamp duty, set by each state. Work out stamp duty.
• Conveyancing, legal and search fees.
• Building and pest inspections.
• Lender costs, such as application and valuation fees, and lenders mortgage insurance if your deposit is under 20%.
• Any initial repairs or renovation before the first tenant.

Step 2: Work out the rent and yield

Get a rental appraisal from a local property manager and check it against similar homes for rent.

Say which price you use. Some people divide by the price plus stamp duty and buying costs, which gives a lower, more conservative figure.

Rental yield calculator →

Step 3: List the holding costs

• Council and water rates.
• Building and landlord insurance.
• Property management fees.
• Strata or body corporate levies, for units.
• Land tax, set by each state.
• Repairs and maintenance allowance.
• Rental compliance, such as gas, electrical and smoke alarm checks.
• Vacancy: allow for a few weeks a year with no tenant.

Moneysmart's advice is simple: work out whether you could cover all the costs for a while with no tenant at all.

Step 4: Work out the cashflow

Cashflow is the rent less the holding costs and your loan interest, by week, month and year. Your broker gives you the loan figures for your situation. If it is negative, that is the amount you fund from your own pocket.

Cashflow calculator → · Break even estimator →

Step 5: Check depreciation and tax

• Capital works deductions on the building, generally 2.5% a year for homes built from 16 September 1987, based on construction cost. A quantity surveyor can estimate it.
• Previously used fittings in an established home generally cannot be depreciated.
• From 1 July 2027, rental losses on established homes bought after 7:30pm AEST 12 May 2026 can no longer reduce tax on your wages. New builds and properties held before that time keep negative gearing.

Step 6: Stress test it

Run the same numbers again with things going wrong:

• Rent 10% lower.
• Six weeks with no tenant.
• A one off repair bill.
• Insurance, rates and land tax higher.
• Your income lower for a year.

Worked example: Kings Meadows, Tasmania

Here are the actual numbers from one of our recent purchases. Loan costs are left out because they depend on the client's own loan.

• Purchase price$521,000
• Stamp duty (Tasmania)$19,140
• Roof and paint$12,000
• Rent$520 a week, $27,040 a year
• Gross yield5.2%
• Rates, insurance, land tax and maintenanceabout $5,980 a year
• Net yield before loan costs, management and vacancy4.0%

Read the full case study →

General information only. It does not take your objectives, financial situation or needs into account and is not financial, tax, credit or legal advice. Citadel Agency is a licensed buyers agency (licence 092247L) and does not hold an Australian Financial Services Licence.