Property Investing 101
Okay, this is a simple example for all the ‘green’ or ‘wannabe’ property investors out there. It doesn’t take rocket science to figure this out.
- Purchase A Property Worth $400,000
- Borrow 95% x $400,000 = $380,000
- Rent It Out @ 4% Of $400,000 = $16,000 Per Year
- Pay Interest @ 8% On $380,000 = $30,400 Per Year
- Negative CashFlow Of $14,400 ($30,400 - $16,000) Per Year
- Wait 10 Years, Property Market Should Have Doubled
- Property Worth $800,000
- Total Gain $800,000 - $400,000 (Purchase Price) = $400,000
- Total Expense: $20,000 (Deposit) + 10 Years x $14,400 (Holding Cost) = $164,000
- Net Profit $400,000 - $164,000 = $236,000 Over 10 Years
- Approximately $23,600 Profit Per Year
I’m sure there are skeptics out there thinking the above tutorial to property investing is way too simple. All I can say to those people are ‘get over it’. The faster you realise there are people making money outside of their 9-5 JOB, the harder you will kick yourself to get out of the rat race! Do yourself a favour and think outside the box.
Obviously the example above assumed rent, interest rate, inflation rate are constant and also did not take negative gearing, stamp duty and tax into consideration. But just remember, the more time you spend counting the less time you have to actually invest.
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