I am going to copy your post and see if I can understand it when I am a little less tired.
For what it’s worth.
If the amount of capital required by an investor to invest in residual property is not capable of growing at a rate in excess of the average rate of return of commercial property then I wouldn’t buy.
That’s probably a terrible way to describe what I am talking about so I will use an example.
The Bank generally decides the amount of equity and therefore the borrowing.
Say commercial property is yielding 9%and that yield is growing in line with inflation. Say the bank requires 20% equity the value of the property is 250g. Borrowings are therefore 200g if you do not believe after all costs are removed your 50g can grow in excess of 9% whether that be a combination of capital growth or yield I would not buy.
My example
I only recently decide to buy a residence again why? I’m in QLD so don’t liken it to VIC.
Residence purchase price 240g
Realistic rent for current residence $250 to $275…..250 x 52 = 13g
Borrowings 180g x 7% = 12.6g
Total purchase price 240g x inflation 3% = 7.2g tax free (principle place of residence) Rates etc 2g 60g x 9% = 5.4g tax to pay (minim 30%)
Capital invested 60g this therefore basically meets my minimum criteria. Variables are of course Interest rate, capital gain/inflation rate, rent rate, agents commission on rent, any tax implications but that depends on the way you borrow, rate of return of commercial property.
Everything I have typed probably does not meet your criteria or your professors but to me money in the bank isn’t much different to gold bars in the backyard.(if you get my meaning) So unless you are very close to the grave or consider the recently above grossly undervalued you should be investing elsewhere.
I also do brain surgery part time but not very well.
