Actually let's do the exercise from the viewpoint of a renter.
You're renting and paying around $350 per week ($18,000 approx per annum) for a house that is valued at $380,000. You have $150,000 cash in the bank .. that's earning you $9,000 at 6% per annum.
If you were to buy that $380,000 house for $400,000 all up including stamp duty etc.. by borrowing $250,000 - that 250,000 will cost you $20,000 per annum in interest at 8%.
Your rental was $18,000 per annum - you are now paying $20,000 per annum as a house owner. Also you have the maintenance and replacement and wear and tear expenses + rates etc.. now sitting firmly on your shoulders. Let's conservatively allow another $5,000 per annum for this. So your $18,000 per annum rent has become a $20,000 per annum bank borrowing interest + maintenance and repairs and replacement + rates ($5,000 p.a. conservatively). Plus you have also lost $9,000 in bank interest .. that your $150,000 was earning you.
So you're paying another $7,000 per annum more as a house owner now plus lost another $9,000 per annum = a $16,000 per annum loss. Ouch !!!
So an investor was another $5,000 per annum worse off in comparison = at $21,000 per annum.
