For review
Henderson's pathway tool turns eight answers into a plan: what to buy, when, how long to hold, when to sell down, and what the end position pays. This page is every assumption and rule behind it, written for someone who is being asked to find the holes rather than admire the output.
One division sets the target, and everything else works backwards from it.
A lead names the passive income they want and when. That income is divided by a net yield to give the assets they need outside their home. The model then asks, year by year, whether holding what they already have would get them there by that date. While it would not, it adds a purchase. Once the goal is in reach it stops buying, holds, then sells everything down, clears the loans and buys one asset that pays them.
The goal is measured after tax and selling costs, not before. Reaching it means that if they sold everything, cleared every loan including the home, and paid capital gains tax and selling costs, what is left outside the home would be the number. That is a deliberately harder test than the gross figure a brochure would use.
One purchase at today's price. This is the claim that lets the model treat each property as standing on its own, and it is the first thing worth checking.
These are the actual constants in the model, read out of it rather than transcribed. The last column is where I think each one is most open to challenge.
One division sets the target for everything else. A lead asking for $200,000 a year is told they need $3.6m.
| Constant | Value | What it drives | Where it could be wrong |
|---|---|---|---|
INCOME_YIELD | 5.5% | The goal: net assets needed = income wanted / this rate. Also what the final asset earns. | A quarter point either way moves a $200k goal by roughly $150k of required assets. Is 5.5% net achievable and sustainable on whatever the end asset turns out to be? |
growth | 7% | Every property, every year, for up to thirty years. | Long-run Australian house price growth is arguable and location dependent. At 5% most fifteen year paths need another purchase or fall short. This is the single most load-bearing number on the page. |
incomeGrowth | 3% | Household income, which feeds savings and borrowing capacity. | Roughly wage growth. Low risk of overstating. |
savingsRate | 8% to 20% | Share of household income added to the deposit pool each year, by income band. | A household on $125k saving 8% is $10k a year. Plausible on paper, optimistic for anyone with children in care. |
Every purchase on every path is one YAM: a house with a second dwelling on one title, held in its own entity.
| Constant | Value | What it drives | Where it could be wrong |
|---|---|---|---|
yamPrice | $1,350,000 | The price of one purchase today, grown at 7% for later years. | Sourced from Henderson. Whether a YAM at this price with these rents is repeatably findable is the commercial question, not a modelling one. |
yamUplift | $50,000 | Added the year after purchase: the lender valuation coming in above cost. | Reduced from $250k on 10 Sep. If the real uplift is larger, paths are conservative; if valuations come in at cost, the next deposit arrives later. |
lvr | 80% | Loan on each new purchase, interest only. | Standard for investment lending. The stacking is capped separately. |
interestRate | 6% | Interest on every loan, flat for the whole horizon. | Flat rates over thirty years is a simplification in both directions. The servicing margin below is what makes it matter. |
costRate | 4.5% | Acquisition costs, paid in cash: $60,750 on a $1.4m purchase. | Roughly covers NSW stamp duty at this price and little else. Legals, inspections and any build contingency are not separately allowed for. |
rentYield.yam | 5% | Gross rent on a new purchase: $67,500 a year. | Two dwellings on one title. The claim the strategy rests on. |
rentYield.ip | 4% | Gross rent on investment property the lead already owns. | A single-dwelling yield. Reasonable. |
yamSite | $800,000 site, $350,000 build | When the pool covers a site but not a finished YAM, the move is the site in its own entity; the second dwelling is added from the year after, as soon as the pool covers the equity on the build and the ceilings allow the construction loan. | Added 16 Sep at Luke's direction. The build cost, the time to build and whether the site rents at 4.5% in the meantime are Henderson delivery facts to confirm. It reverses the 10 Sep rule against modelling the two steps. |
firstRung.house | $600,000 to $1,000,000 | When the pool is under 60% of a YAM deposit, the first move is an established house at 80% LVR sized to the pool in this range. Sold in the consolidation like any investment. | Added 16 Sep. Before this a renter with $75k was shown a $1.35m YAM with a $256k gap, or nothing. Whether Henderson wants to source a $600k house for a client is a product question. |
firstRung.firstHome | 95% LVR, 2% costs | For a renter with at least $40,000 cash who cannot fund a house either: a first home, sized to cash and to about six times income, between $500,000 and $900,000. Kept as the home; its equity funds the first YAM once it has grown. | The 5% deposit and duty-free entry stand in for the first home buyer schemes, whose price caps and thresholds differ by state and change. Illustrative. The home loan then counts against the 15x total debt ceiling, which is what stops a $125k household ever reaching a YAM. |
holdingCostRate | 22% | Deducted from gross rent wherever income is reported: management, insurance, rates, land tax, maintenance, vacancy. | Added 15 Sep. A conventional allowance, but land tax in particular scales with holdings and is not modelled per state or per entity. |
chargeCarry | on | Each year net rent less interest on investment debt is charged against cash, so a YAM's shortfall of about $12,150 a year slows the next deposit. If savings do not cover it, the shortfall is redrawn against the book. | Added 16 Sep. Before this the carry was reported but never charged, so second and third deposits arrived faster than they would. An existing investment at 4% gross and light gearing is cash positive under the same rule, which is why holding the default book now gets further than it did. |
What stops the model buying forever.
| Constant | Value | What it drives | Where it could be wrong |
|---|---|---|---|
maxPortfolioLvr | 75% | No purchase may take total debt above this share of total property value. | Added 15 Sep after paths ran to 77% and 34x household income. Whether 70% is the right ceiling is a broker question. It is the main brake in the whole model. |
firstBuyLvrCeiling | 88% | The one exception: a first investment purchase, where a single 80% loan breaches the ceiling by definition. | Set to leave room for a first move with a real but bridgeable deposit gap. It is the loosest rule in the model. |
maxDebtToIncome | 15x | No purchase may take total debt, home and entity loans included, past this many times that year's household income. Income grows 3% a year, so the ceiling rises. | Added 16 Sep after the default book asked for ten years passed the LVR ceiling with five purchases and $11.5m of debt on $275k of income, 42 times. This is a guess for a broker to set. It is what caps that lead at two purchases and what blocks the low income lead's opening move. Zero turns it off and the stacking returns. |
dtiMultiple | 6x | Personal capacity: this times household income plus counted rent, less counted debt. Tests only the deposit redrawn against existing equity. | Entity loans are exempt from this test entirely. That is the Henderson structural claim and the thing an external broker should judge first. The total debt ceiling above now bounds the whole book regardless. |
maxBuys | 6 | Most purchases any path can show. | A blunt cap that rarely binds now the leverage ceiling exists. |
minHoldYears | 5 years | Nothing is sold inside this many years of the last purchase. | Reasonable, and it keeps CGT and selling costs from being churned. |
Every investment is sold. The proceeds clear the loans and buy one asset that pays them.
| Constant | Value | What it drives | Where it could be wrong |
|---|---|---|---|
sellCostRate | 2.5% | Deducted from every sale price. | Agent and marketing. Reasonable for residential. |
cgtRate | 30% | Capital gains tax on the gain from every sale. | A flat company-style rate with no discount. Individuals holding over a year would pay less; entities pay this with no discount. Existing investments are taxed on the gain from today's value because the tool never asks what they cost, which understates their real bill. |
stopBuyingYearsBefore | 6 years | No purchase inside this many years of the end, so there is time to hold and sell. | A five year request therefore always shows a longer plan. |
maxYears | 30 years | How far the horizon can be pushed when the goal cannot be reached in the time asked. |
Each of these was argued out and changed at least once. The note under each says what it is guarding against.
Every run works to the horizon the lead asked for, even when the chart has to run longer so the sell-down can finish. Extending the timeline never relaxes the effort.
Fixed 15 Sep. Targeting the extended date made the plan lazier the further out it went: at twenty years one purchase eventually reaches any goal.
A purchase is drawn in the first year on every path that buys at all. If it cannot be funded today it is still drawn, flagged, with the deposit gap in dollars, or a note that the book is already carrying as much debt as it should against its value, or against household income.
Luke's instruction: the bias is that the first move is now. It is the one purchase exempt from both ceilings.
Where the deposit pool cannot fund a YAM, the opening move is a foundational asset instead: an established house at 80% LVR sized to the pool, or a first home at 95% for a renter. Later moves on that path are YAMs where the ceilings allow and houses where they do not, and each has to leave the lead materially closer at the horizon.
Added 16 Sep after the Marketing Director's read of a renter's sheet. Luke: a zero baseline and an ambitious target means at least one purchase, and not every first purchase is a YAM.
Has to earn its place: either it lands them inside the horizon they asked for, or it pulls the arrival year forward by at least 1 years. Someone whose existing book already gets there is held to the stricter of the two.
Without this a goal that cannot be reached by the asked date leaves the model buying to the cap.
Up to 1 purchases in a year on an ambitious plan (a horizon of 10 years or less, or a goal needing 4 or more purchases), otherwise one a year with the first two a year apart. After that, a gap of about a fifth of the horizon before the next purchase year.
Two years on a ten year plan, four on a twenty.
No purchase may take total debt past 75% of total property value, or past 15 times household income with every loan counted. Someone already above either buys nothing until growth, of values or of income, brings them back.
The LVR ceiling produces the buy, wait for growth, buy again rhythm. The debt-to-income ceiling is what stops a $275k household being shown $11.5m of debt, which the LVR ceiling alone allowed.
Nothing is bought once holding what they have would reach the goal by the horizon. Nothing is bought in the last 6 years.
From the year after the goal is first in reach, every investment is sold, a few a year, oldest first. The first proceeds clear the home loan, then one asset paying 5.5% net is bought and paid off by the sales that follow.
The end position is the home plus that one asset.
Four or more investments that would reach the goal by holding are a clean-up: nothing is bought and the sell-down starts in year one. If selling that early would make them arrive later than holding, because it forfeits growth on everything sold, the sell-down waits for the year the goal is reached instead, and whichever arrives first is shown.
Fixed 16 Sep. The consolidator lead sold from 2027 and arrived in 2040 when holding would have arrived in 2038. No path may now arrive later than its own hold-only run, consolidators included.
Generated from the live model. "Holding" is the same book with no purchases at all, which is the comparison the sheet leads with. Figures in red finish at twice the income asked for or more.
| Lead | Wants | Buys in | Horizon | Arrives | Ends at | Peak debt | Out of pocket |
|---|---|---|---|---|---|---|---|
| Default leadHome $1.375m with $625k owing, one investment $875k with $375k owing, $275k income, $250k cash, $200k in 15 years | $200kneeds $3.6m | 2026, 2027 | 15y | 2037holding: short | $344k1.7x the goal | $4.0m70% of value | -$15kworst year |
| Default, $100k goalSame book, asks for $100k | $100kneeds $1.8m | 2026, 2027 | 15y | 2033holding: 2040 | $295k3.0x the goal | $4.0m70% of value | -$15kworst year |
| Default, $300k goalSame book, asks for $300k | $300kneeds $5.5m | 2026, 2027, 2032 | 15y | 2039holding: short | $392k1.3x the goal | $5.1m70% of value | -$15kworst year |
| Default, $500k goalSame book, asks for $500k: the honest stretch | $500kneeds $9.1m | 2026, 2027, 2032 | 15yshown 20y | 2043holding: short | $745k1.5x the goal | $5.1m70% of value | -$15kworst year |
| Default, 5 yearsSame book, wants it in 5 years | $200kneeds $3.6m | 2026, 2027 | 5yshown 15y | 2037holding: short | $344k1.7x the goal | $4.0m70% of value | -$15kworst year |
| Default, 10 yearsSame book, wants it in 10 years | $200kneeds $3.6m | 2026, 2027 | 10yshown 15y | 2037holding: short | $344k1.7x the goal | $4.0m70% of value | -$15kworst year |
| Default, 20 yearsSame book, wants it in 20 years | $200kneeds $3.6m | 2026, 2027 | 20y | 2037holding: 2046 | $562k2.8x the goal | $4.0m70% of value | -$15kworst year |
| Home only, low cashHome $1.375m with $625k owing, no investments, $350k income, $75k cash | $200kneeds $3.6m | 2026, 2029, 2032 | 15y | 2039holding: short | $302k1.5x the goal | $6.1m74% of value | -$15kworst year |
| Equity sitterHome $1.75m with $375k owing, no investments, $225k income, $75k cash | $200kneeds $3.6m | 2026, 2027 | 15y | 2040holding: short | $232k1.2x the goal | $3.7m68% of value | -$26kworst year |
| Late starter, 10 yearsHome $1.375m with $375k owing, no investments, $175k cash, 10 years | $200kneeds $3.6m | 2026, 2027, 2029 | 10yshown 15y | 2038holding: short | $321k1.6x the goal | $4.8m72% of value | -$22kworst year |
| Doctor, 10 yearsHome $1.75m with $625k owing, one investment $1.375m with $875k owing, $450k income, $400k cash, 10 years | $200kneeds $3.6m | 2026, 2027, 2029 | 10y | 2034holding: short | $293k1.5x the goal | $7.4m65% of value | -$134kworst year |
| Business owner, $300kHome $1.75m with $625k owing, no investments, $450k income, $250k cash | $300kneeds $5.5m | 2026, 2027, 2030, 2033 | 15yshown 20y | 2038holding: short | $789k2.6x the goal | $8.2m69% of value | -$78kworst year |
| Low income, $300kHome $1.375m with $375k owing, one investment $875k with $375k owing, $125k income, $250k cash | $300kneeds $5.5m | 2026 | 15yshown 20y | 2044holding: short | $415k1.4x the goal | $2.1m55% of value | -$9kworst year |
| High earner, $500kHome $1.75m with $625k owing, two investments $2.25m with $1.25m owing, $600k income, $650k cash | $500kneeds $9.1m | 2026, 2027, 2030, 2033 | 15y | 2035holding: short | $1.1m2.3x the goal | $13.1m69% of value | -$82kworst year |
| Hertan, big bookHome $1.75m with $625k owing, three investments $5m with $2.5m owing, $600k income, $650k cash, $400k in 10 years | $400kneeds $7.3m | 2026, 2027, 2029 | 10y | 2032holding: 2035 | $743k1.9x the goal | $13.3m69% of value | coveredworst year |
| Jordan, renter with $5m of propertyNo home, five investments $5m with $2.5m owing, $900k income, $650k cash, $500k in 5 years | $500kneeds $9.1m | 2026, 2027 | 5yshown 10y | 2033holding: 2036 | $768k1.5x the goal | $10.1m71% of value | -$104kworst year |
| ConsolidatorHome $1.375m with $375k owing, four investments $2.75m with $1.25m owing, $225k income, $175k cash | $200kneeds $3.6m | 2026 | 15y | 2033holding: 2036 | $490k2.5x the goal | $4.2m62% of value | coveredworst year |
| Big book, big goalSame four investments, asks for $500k: holding does not get there, so it is a normal path | $500kneeds $9.1m | 2026, 2028 | 15y | 2040holding: short | $590k1.2x the goal | $5.3m62% of value | coveredworst year |
| Crushing itHome $1.375m with $375k owing, three investments $3.5m with $1.25m owing, $275k income, $175k cash: holding alone gets there | $200kneeds $3.6m | 2026, 2027 | 15y | 2030holding: 2032 | $716k3.6x the goal | $6.7m63% of value | coveredworst year |
| Renter, $250k cashNo property, $225k income, $250k cash | $200kneeds $3.6m | 2026, 2031, 2034 | 15yshown 20y | 2041holding: short | $393k2.0x the goal | $4.6m80% of value | -$37kworst year |
| Renter, $175k cashNo property, $225k income, $175k cash | $200kneeds $3.6m | 2026, 2032, 2035 | 15yshown 20y | 2042holding: short | $346k1.7x the goal | $4.6m80% of value | -$41kworst year |
| Renter, $75k cashNo property, $125k income, $75k cash: the gap case | $200kneeds $3.6m | 2026, 2031 | 15yshown 30y | not reachedholding: short | $176k0.9x the goal | $1.5m95% of value | -$11kworst year |
| Renter, $125k cash, 20 yearsNo property, $175k income, $125k cash, $200k in 20 years: the first rung | $200kneeds $3.6m | 2026, 2030, 2034 | 20yshown 25y | 2047holding: short | $337k1.7x the goal | $3.6m95% of value | -$14kworst year |
| Thin homeownerHome $875k with $625k owing, no investments, $175k income, $75k cash | $200kneeds $3.6m | 2026, 2029, 2036 | 15yshown 25y | 2047holding: short | $332k1.7x the goal | $3.0m80% of value | -$12kworst year |
| Luke's scenario, $225kHome $1.375m with $625k owing, no investments, $225k income, $125k cash, $300k in 15 years | $300kneeds $5.5m | 2026, 2027, 2034 | 15yshown 20y | 2043holding: short | $441k1.5x the goal | $4.3m75% of value | -$20kworst year |
| Luke's scenario, $275kSame home and cash, $275k income | $300kneeds $5.5m | 2026, 2029, 2032 | 15yshown 20y | 2042holding: short | $519k1.7x the goal | $5.2m72% of value | -$15kworst year |
If you only have time to challenge a few things, challenge these. They are ordered by how much of the output moves if the answer changes.
A YAM at $1.4m carries a $1.1m loan. Gross rent is $67,500 a year against $64,800 of interest, so it covers by $2,700. After the 22% allowance for management, insurance, rates, land tax, maintenance and vacancy, rent is $52,650 and it is short by $12,150.
The model reports income net of those costs, but the capacity test that lets an entity loan sit outside personal borrowing power still uses gross rent. That is the Henderson structural stance and it is deliberate, but it means the claim "once its rent covers its interest it is assessed on its own numbers" is true on gross and false on net. A lender assessing at three percentage points above the actual rate would fail it outright. If a second opinion changes one thing, it should probably be this.
Every result on the page is downstream of it. It is not a forecast and the page says so, but a reader who disagrees with it disagrees with everything. Worth asking what the number should be, and whether the sheet should show a lower case alongside.
Only the deposit redrawn against existing equity is tested, at six times income. The purchase loans themselves are assumed to be assessed on the asset. This is the single biggest driver of how many purchases a path can show, and it is a lending structure question rather than a modelling one. A broker should say whether it survives contact with a real credit assessment across four or five entities.
Seventy per cent of total property value, with a first purchase allowed to 88%, and 15 times household income on top. The LVR ceiling alone let the default book asked for ten years reach $11.5m of debt on $275k of income; the debt-to-income ceiling added on 16 Sep caps the same lead at two purchases. After both, the heaviest lead peaks at $13.3m of debt before its sell-down. Whether 70% and 15 times are right is exactly the sort of thing to ask someone who writes loans, and the 15 in particular is a guess until one does.
Right for a company, wrong for an individual holding over a year, and it varies with how the entities are structured. Existing investments are taxed on the gain from today's value, because the tool never asks what they were bought for, which understates their real bill. The sheet says tax is an accountant conversation, but the number it prints is specific enough to be argued with.
4.5% of price, $60,750 on a $1.4m purchase. That is roughly NSW stamp duty at this price and little else. Legals, inspections, lenders mortgage insurance where it applies, and any build contingency sit inside the same allowance or outside the model.
Purchases come in $1.4m lumps against goals of $1.8m to $9.1m, so most paths land above the number asked for. 17 of the 26 leads below finish between one and 1.8 times their goal, and 6 finish above twice it. Those are the leads where holding alone would reach the goal, so a move only has to pull the date in by two years to earn its place; the model is more willing to buy for them than for a lead who is short. That is arithmetic rather than salesmanship, but a reader should know it is there.
Stated on the page itself, but collected here so nothing has to be inferred.