Your disposable income is how much money you have left over from your weekly income once you’ve paid all your expenses, such a groceries, utility bills, home loan repayments and entertainment spending.
It’s important to understand your disposable income as this money will help you meet the holding costs of buying an investment property.
As the name suggests, holding costs are any expenses that come with owning an investment property, such as your loan repayments, property management fees, council rates, strata fees, property insurance and maintenance expenses etc.
The rental income you receive from the investment property will help to cover part of your holding costs. In some cases, the rental income may even cover all of the holding costs, but this will depend on the type of property, the prevailing market conditions and other factors. Learn more about rental income.
If the rental income doesn’t cover all your holding costs, though, then you’ll need to chip in some of your own money to meet these expenses. This is why it’s important to understand your level of disposable income.
Regardless, it’s important to know your disposable income and how it will be impacted if circumstances change, such as rent reductions, vacancy periods or increases in interest rates etc.