Commercial Property Cash Flow Calculator

In my experience, 6% or above on an after-tax basis is a solid benchmark for a commercial property investment in the current Australian rate environment. That said, no single number applies universally, because the right return depends on your loan structure, your marginal tax rate, and what you're comparing the investment against.

The more useful question to ask is whether your return actually beats your cost of capital. If your commercial property loan is sitting at 6.75% and your after-tax cash-on-cash is only 5%, the numbers simply don't stack up without a very compelling capital growth argument. On the other hand, if you're generating 8–9% after tax, the investment is genuinely putting money in your pocket each year. The calculator above gives you your personalised after-tax figure, so run both the interest-only and P&I scenarios to see exactly what range you're working with before you make any decisions.

This is one of the most common surprises I see with first-time commercial investors, and it comes down to one thing: gross yield doesn't account for financing costs or operating expenses. Take a $1.5M property at 6% gross yield. The annual rent looks like $90,000, which sounds healthy. However, if your loan is $1.2M at 6.75% interest-only, you're already paying $81,000 in annual interest before a single dollar of rates, insurance, management fees or maintenance.

Once you add those operating costs on top, the numbers can turn negative quickly. The property looked attractive on the listing data sheet, but the real picture only emerges when everything is factored in together. Importantly, this doesn't always mean you should walk away. In many cases, the fix is to negotiate a better purchase price, structure the loan differently, or focus specifically on net lease properties where the tenant covers outgoings directly. If you're looking at a deal and the numbers feel tight, come and talk to me before you sign anything and we'll work through the actual figures together.

Depreciation is what I often describe as a paper deduction. It reduces your taxable income without you actually spending any additional money, and because of that, it directly improves your after-tax cash position. For example, if you have $20,000 in annual depreciation and your marginal tax rate is 37%, that's $7,400 in tax you simply don't pay. That amount effectively lands in your pocket each year at no extra cost to you.

Not every commercial property generates significant depreciation, though. Older buildings often have fully depreciated assets, which means this benefit is reduced or gone entirely. Newer properties, or those with recent fit-outs, typically offer the highest depreciation potential. A quantity surveyor's report, which usually costs $700–$1,200, will identify exactly what's available for your specific property. In my experience, it's one of the highest-return pieces of paperwork you can commission on a commercial property investment. If you're not currently entering a depreciation figure in this calculator, there's a good chance you're underestimating your true after-tax return.

Interest-only loans maximise your monthly cash flow because you're servicing the debt without reducing the principal. For an investment property where the goal is income and long-term capital growth, that cash flow difference is real and meaningful. In fact, it can be the deciding factor between a positively and negatively geared property, particularly in the early years of ownership.

The trade-off, however, is that you're not building equity through repayment. You're relying entirely on market growth for that, so if values don't move in your favour, you'll owe the same amount several years later as you did on settlement day. Additionally, most lenders offer interest-only periods of three to five years, after which the loan typically reverts to principal and interest. That reversion is worth modelling now so there are no surprises later. On a $1M loan, P&I repayments can be $2,000–$3,000 more per month than interest-only, which is a significant shift in your cash position. Run both scenarios in the calculator above and you'll see the gap clearly. If you'd like to understand which structure suits your situation, our guide to commercial property purchase loans covers this in more detail.

The ownership structure doesn't change your pre-tax cash flow at all. The income, expenses and loan repayments are the same regardless of whether you buy in your personal name, through a company, or via a trust. Where the structure makes a real difference is in the tax line, which then flows through to your after-tax position. A company pays a flat 25–30% tax rate on income, which can be lower than an individual's marginal rate. A discretionary trust, on the other hand, can distribute income to beneficiaries in lower tax brackets, potentially reducing the overall tax bill across the family group.

Importantly, though, the right structure depends on your broader financial position, your plans for the property, and how you intend to manage the asset long term. This isn't something to set up in a hurry. Changing your ownership structure after purchase triggers stamp duty and potentially capital gains tax, so the decision needs to be made before you buy, not after. I strongly recommend speaking with an accountant who specialises in commercial property structures before you proceed. If you'd also like to understand how structure affects borrowing capacity, our SMSF commercial property guide covers the trust and super fund angles in depth.

Yes, and this is actually one of the more favourable aspects of commercial property lending compared to residential. Most lenders will factor in the existing rental income when assessing serviceability, particularly for investment purchases. Generally speaking, they apply a shading factor of 70–80% to the actual rent to account for vacancy and management costs, then include that shaded figure as part of the serviceability calculation.

For owner-occupiers, the assessment works differently. In that case, the lender is primarily looking at the borrowing entity's ability to service the debt from business cash flow, rather than rental income. Some lenders will accept a commercial lease in place to an arm's-length tenant, but it's assessed under a different framework to a pure investment loan. What matters most, in either scenario, is the quality of your tenancy. A national tenant on a long-term lease is a significantly stronger serviceability argument than a month-to-month arrangement with a small business, and lenders price accordingly. If you'd like to understand specifically how your tenancy situation affects what you can borrow and at what rate, book a call with our team and we'll look at it properly.