By my calculations the property is about $1,800 cash flow positive. The figure of 38% equity in that property is correct if you use the base of the acquisition price (plus costs), if the current estimated market value is used the equity would be around 46% I think.
Re the destruction of capital you mentioned, obviously I don't share that opinion for the next 12 months on that property. I watch the market reasonably closely in this area and my 8% growth opinion is based on what I am seeing in interest in the area and the money being spent there in building of very large houses. Of course, we don't know anything as fact but I feel that it is worth the positioning at the moment.
The $27k annually was what I considered I wanted as a rate of return on the 'equity ' that I have invested at overall asset value of $740k. The power of gearing (when it goes well) means that the 8% return on capital comes from a 3% or so increase in the value of the asset.
Having said all that, the driver of all these decisions comes from a lifestyle set of decisions which will over-ride the economics. To the extent that assets provide choices - they are great - however, I would liquidate them if it compromised the choices we have in life.
In the absence of these decisions we are facing, I would hold the property for a long time without any reservations at all, it is a great property in a wonderful part of Sydney.
