Introduction Tamworth, NSW, has emerged as a strong regional investment hub due to its economic growth, low vacancy rates, and expanding infrastructure. This case study explores an investment in a dual occupancy property in Tamworth, NSW. The analysis assumes a 100% Loan-to-Value Ratio (LVR) at a 6.25% interest-only investment loan, a 10-month construction period, and an initial land loan of $167,000. The property is expected to yield $800 per week in rental income, offering a 6.88% gross rental return.
Investment Overview
Property Type: Dual Occupancy (2 x 3-bedroom, 1-bathroom dwellings)
Purchase Price: $604,000
Land Cost: $167,000
Construction Cost: $437,000 (drawn progressively over 10 months)
Depreciation: $23,000 in the first year
Interest Rate: 6.25% (interest-only)
Rental Income: $800 per week
Vacancy Rate: 1.1%
Projected Capital Growth: 6.2% annually
Tamworth Population: 69,000
Key Growth Driver: University of New England’s new Tamworth campus with 10,000 students over the next decade
Property Management Fee: 7% of rental income ($2,912 per year)
Maintenance Costs: $1,000 per year
Growth Projection Over 10, 20, and 30 Years
Using a 6.2% annual capital growth rate, the projected property value over time is calculated as follows:
Year | Projected Value |
0 | $604,000 |
10 | $1,116,899 |
20 | $2,065,618 |
30 | $3,822,230 |
This data suggests that over 30 years, the property’s value could more than triple, making it a compelling long-term investment.
Loan Drawdown and Interest Payments
The construction loan is drawn down progressively over 10 months in five stages, increasing until the full $437,000 loan amount is reached. The land loan of $167,000 is assumed to be financed from settlement.
Loan Structure
Total Loan Amount: $604,000
Land Loan (immediate): $167,000
Construction Loan (progressive over 10 months): $437,000
Final Monthly Interest Payment at Full Drawdown: $3,145/month (Interest-Only)
5-Year Cash Flow Analysis
To analyse the investment's profitability, we factor in rental income, interest costs, property management fees, maintenance, and depreciation benefits over the first five years.
Year | Rental Income | Loan Interest | Property Mgmt (7%) | Maintenance | Depreciation | Tax Benefit* | Net Cash Flow** |
1 | $41,600 | $37,740 | $2,912 | $1,000 | $23,000 | $8,280 | $8,228 |
2 | $41,600 | $37,740 | $2,912 | $1,000 | $21,000 | $7,560 | $7,508 |
3 | $41,600 | $37,740 | $2,912 | $1,000 | $19,000 | $6,840 | $6,788 |
4 | $41,600 | $37,740 | $2,912 | $1,000 | $17,000 | $6,120 | $6,068 |
5 | $41,600 | $37,740 | $2,912 | $1,000 | $15,000 | $5,400 | $5,348 |
Assumptions:
Tax benefit calculated assuming a 32.5% tax bracket (common for investors)
Net cash flow after tax, property management fees, maintenance, and depreciation benefits
No vacancy assumed due to a 1.1% vacancy rate
Why Invest in Tamworth?
High Rental Demand: With a 1.1% vacancy rate, rental properties are in high demand.
University Expansion: The University of New England (UNE) Tamworth Campus is expected to bring 10,000 students, increasing rental demand.
Employment Growth: 1 in 3 workers in Health & Education provides stability to the rental market.
Strong Capital Growth: Tamworth has experienced 74% median price growth, and 6.2% projected future growth.
Affordable Entry Price: At $604,000, it remains an affordable investment compared to Sydney or Melbourne.
Conclusion
Investing in dual occupancy in Tamworth presents an attractive investment opportunity with strong rental returns, capital growth, and tax benefits. With a projected 6.2% growth rate, this investment could more than triple in value over 30 years. Additionally, the cash flow remains positive due to strong rental yields and depreciation benefits. Given the university expansion and strong employment base, Tamworth remains a solid choice for property investors.
Final Verdict: High-yielding, high-growth investment with strong fundamentals and tax benefits.