surely they must be getting nervous?, page-42

Lets look at another scenario..quick and dirty

$650k investment property purchased with 20% deposit. Grows at 3% per annum for the next 15 years. Is worth $1,012,679 in 15 years.

Loan taken out interest only for 15 years on $520k, repayments over 15 years totals $629k. For simplicty I have ignored other holding costs such as R&M etc.

Property rented out for $500 per week, with a rate increase of 3% per annum. Totals $483,571.

Property is negatively geared a total of $145k, providing a 15 year holding cost of around $87k

O.K, so we sell after 15 years-$343k profit on sale, less $15k sale costs, $68k in tax leaves you with a profit of $259k. Less your holding costs of $87k and $35k in purchase costs delivers a grand total return of $137k. Hmmm not bad...


BUT..

If you did the most boring thing ever and instead of buying the property just put your deposit and out of pocket expense into the bank you would end up with around $380k at the end of 15 years!!

$380k profit by being boring versus $137k on property-and thats ignoring alot of costs such as rental insurance, damge, periods of vacancy, property management etc etc

Intersting...better pray for some above inflation cap gains!!