S D Question 7: Residential Property An investor has recently purchased a negatively geared property with the following characteristics: Building component as % of purchase price 50% Fixtures and Fittings as % of purchase price f 5% Deposit provided by investor $50,000 Investor's annual out-of-pocket contribution $5,000 Rent as a percentage of purchase price 5% Operating expenses as a percentage of rent h 22% Cost of debt finance 8% Investor's marginal tax rate 48.5% Building allowance Average depreciation rate for fixtures and fittings d a) What is the maximum price the investor should pay for this property? b) Explain how the Negative-gearing Investor Contribution - Value model helps maximise negative gearing returns. c) Identify one important factor of property investment that is not included in this model. et om S D Question 7: Residential Property An investor has recently purchased a negatively geared property with the following characteristics: Building component as % of purchase price 50% Fixtures and Fittings as % of purchase price f 5% Deposit provided by investor $50,000 Investor's annual out-of-pocket contribution $5,000 Rent as a percentage of purchase price 5% Operating expenses as a percentage of rent h 22% Cost of debt finance 8% Investor's marginal tax rate 48.5% Building allowance Average depreciation rate for fixtures and fittings d a) What is the maximum price the investor should pay for this property? b) Explain how the Negative-gearing Investor Contribution - Value model helps maximise negative gearing returns. c) Identify one important factor of property investment that is not included in this model. et om