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All very good advice guys.
I guess the thing to remember is that WE have the power! [8D]
Ernest is right to some extent. A lot of it depends on the location that you buy. There have been cases of negative growth. You just need to look at Residex data to see that. But property investing is for a long term.
You should also remember that equity leases are taken out for long terms (5yrs). If you have done your homework, then you should NEVER be in a situation where your property has not appreciated over 5 years!!
$700 per week for a $400,000 property is a bit of overkill. As people said, no one would ever pay that. The idea of an equity lease is to make it look attractive for the renter and to turn your negatively geared property into a positively geared one.
Initially you would just have to increase the rent to the point where you are in the black. There is usually a clause in the contract to allow for rental increases each year, so that should make the property even better in the following years (even with interest rate rises).
Personally I haven’t tried it, but I will most certainly use it. Why would you want to ‘pay’ money ongoing for a property? Isn’t the whole idea for the property to provide YOU with a passive income??
Adding $100 to the rent (in walkernicks example) would increase the rental yield from 5.2% to 6.5%. Almost unheard of in Sydney now!
At the end of the 5yrs, the renter would have paid an extra $26000. The property would have increased in value by at least 50% (given the stat that properties double in value every 7-10 years). So the property has increased by at least $200,000. You might offer the tenant 20% ($40,000) so now you have a property that you dont have to pay for, that has grown $160,000 (very conservative value for a well researched property) over 5 years!
