The buyer is now considering the purchase of an investment property instead of a home. Your buyer tells you that the property is expected to return $280pw in rent and is expecting an operating expense of $40pw. The Bank's LVR for a loan is expected to be 80% and the banks are currently evaluating investment loans based on interest rates of 6.00%pa over a 30 year term compounded monthly paid monthly.

1. a) What is the maximum loan the banks will lend the buyer if the loan was based purely on the income producing abilities of the investment property from the scenario above? Hint: You will need to estimate the net weekly rent, then convert it to a monthly mortgage servicing ability.

b) What is the maximum loan the banks will lend the buyer if the loan was based on 50% of the after tax income (Question 2) of your buyer and the income producing abilities of the investment property from the scenario above? 

c) What is the max price your buyer can afford to pay for this investment based on the maximum loan amount estimated in Queston 6b and assuming that the buyer is able to afford the 20% deposit, stamp duty and acquisition costs? (1 mark) *Disregard what the buyer actually have saved up.

d) What is the 20% deposit required from your buyer based on your answer in Question 6c? How much would the buyer need to save every month in their bank account that pays 3.00%pa compounded monthly, "Savings @ start" already available today and wanting to have the 20% deposit ready at the end of 2 years? (3 marks) *Disregard other costs.

e) Calculate the difference between your buyer's after tax income (Question 2) and savings amount every month in Question 6d?