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- Originally posted by simple:
Some simple mathematics here, some one please correct me here as I cannot get my head around this!
IP in our area cost for example $300K has return of $300/w minus expenses land and running cost you get about 250/week if lucky. Which is about 4.5% return on capital.
If I put the same money on my bank account I get over 6% return.
Now the big question, why would you buy IP if market is flat or growing anywhere under 1.5% ??Well, if you put $300K into the bank getting 6% return, then your return is on the $600K, yes? If you purchase property using the $600K as deposits (at 80% LVR you could purchase up to $3M worth of property if you could service it OK), and then you get your return on $3M rather than just your $600K. You could therefore stand to gain lesser as a percentage on the $3M property portfolio and still come way out in front than getting 6% on just $600K.
Andrew.
