The example
These are illustrative assumptions, not a quote or a forecast. Replace each one with real figures before relying on the result.
- Price: $650,000, with a 20% deposit
- Loan: $520,000 at 6.2% interest only
- Rent: $560 a week, $29,120 a year
- Running costs: $9,780 a year (the same split as in gross vs net yield: $1,120 vacancy, $1,960 management and letting, $2,800 council and water, $1,900 landlord insurance, $2,000 repairs)
- No land tax, no strata, and buying costs are paid upfront, so they're not in the weekly figure
The sum
| A year | Amount |
|---|---|
| Interest ($520,000 × 6.2%) | $32,240 |
| Running costs | $9,780 |
| Total cost | $42,020 |
| Less rent | −$29,120 |
| Shortfall | $12,900 |
| Per week (÷ 52) | about $248 |
That's before tax. Under the old rules, many investors would have expected part of that shortfall back through their tax return. For an established house acquired after 7:30pm AEST on 12 May 2026, from 1 July 2027 that assumption no longer holds in the same way (more below).
Hold a buffer as well
The weekly figure is an average. Real costs arrive in lumps: a hot water system, a six-week vacancy, an insurance renewal. A cash buffer separate from your emergency fund stops one bad quarter turning into a forced sale.
As an illustration only, six months of this holding cost is 26 × $248 = $6,448. Some people hold more, especially in the first year when they don't yet know the property. How much is right for you depends on your income, your other commitments and your loan, so it's a question for your broker and a licensed financial adviser.
If rates rise by 1%
Interest is the largest line, so it's the one to stress-test.
| Interest rate | Interest a year | Weekly cost after rent |
|---|---|---|
| 6.2% | $32,240 | $248 |
| 7.2% (+1%) | $37,440 | $348 |
| 8.2% (+2%) | $42,640 | $448 |
Each 1% rise on a $520,000 loan adds $5,200 a year, or $100 a week. Rents may rise over time too, but there's no rule that says they move with interest rates, so we don't assume they will. If your budget only works at today's rate, it doesn't really work.
Interest only vs principal and interest
The $248 assumes interest only. On principal and interest over 30 years at the same 6.2%, the repayment is about $3,185 a month, or $38,218 a year. The weekly cost after rent rises to about $363.
Not all of that extra $115 is lost. In the first year, about $6,151 of the repayments (around $118 a week) pays down the loan rather than going to the bank. It's still cash out of your pocket each week, which matters for your budget, but it builds equity. The trade-offs, and what happens when an interest-only period ends, are covered in interest only vs principal and interest.
The 2026 tax change
For established residential property acquired after 7:30pm AEST on 12 May 2026, from 1 July 2027 rental losses can only be offset against residential property income and gains, with unused losses carried forward. Properties owned before 12 May 2026 keep the old loss treatment. Your accountant can tell you how it applies to you.
In practice, for a house bought now, the $248 a week is likely to come out of your after-tax income. The loss isn't wasted: it's carried forward and may be used against future residential rental income or gains. But it won't reduce the tax on your salary each year the way negative gearing used to. The rules also change how capital gains are taxed from 1 July 2027. The full detail is in our guide to the 2026 tax changes.
That's why we quote holding costs before tax. It's the honest number for planning.
Other things that move it
- Land tax. In Victoria, a single investment house with a land value of $400,000 would add about $1,650 a year, or roughly $32 a week, taking this example to about $280. Other states have much higher thresholds. See land tax: when it starts to bite.
- Rent. $20 a week less rent is $20 a week more cost. Check rents on comparable leased houses, not asking rents.
- Vacancy. Every extra week empty adds about $11 a week averaged over the year ($560 ÷ 52).
- Deposit. A bigger deposit means a smaller loan and lower interest, but more cash tied up.
Where this fits
Holding cost is one of the two numbers that make or break investing first (the other is growth). Our guide on whether to invest before you buy your own home explains how the two work together. The cashflow calculator on our calculators page starts with exactly this example, so you can change any line and see the weekly figure move. Speak to a mortgage broker about the loan, and your accountant about tax.
Sources
General information only. Nothing on this site takes into account your objectives, financial situation or needs, and it is not financial, credit, tax or legal advice. Past performance is not a reliable guide to future performance.