Assumming a $400K property
Borrow $320K mortgage and $80K deposit Loan
assuming 3 year time the property is worth $500K (approx 7% growth per )
$100K profit
Less $40K to deposit lender
$20K in purchase and selling costs
$10 in holding costs(repairs rates taxes) for 3 years
Leaves the purchaser with a $30K profit
Based on current interest rates on $320 mortgage, the interest expense over the 3 years will be approx $94K
Rent
Rent the same $400K property for $20K per year (5% gross yield)
Total rent over the same period $60K
Result make $30K profit but will cost you $34K more than if you rented the property.
Clearly this is ONLY a simplistic overview and the are other variables that can make either option more or less attractive
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- answers for pennyo
answers for pennyo, page-91
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