Want to contribute to the experiences shared on this site. Constructive comments only please...

I have held an investment property in victoria for 9 years, and have just done the sums to see how I have done… Here is what I found.

I started with $35000 saved (my initial investment)…

Purchased a 3x1 house for $260,000

Stamp duty $10,000 or so

Loan value $235,000 (interest only)

Rented it out for $240-270 per week.

Average annual rental income around $13,000

Average annual realestate fees around $1,000

Average annual interest payment around $18,000

Average annual loss around $6,000

Average annual Tax saving around $3,000

Therefore the property cost me about $3,000 per year.

Property now worth about $360,000 which is a 40% gain over 9 years which is pretty ordinary I guess.

Capital costs over that time…

New roof $10,000

Landscaping $15,000

New window-frames $10,000

New gas, dishwasher, etc $1000

So at least $36,000 paid in capital costs.

So I have some equity. If I want to get this money I need to sell it. Pay 3% of sale price to a real-estate agent to sell it ($10,000) and then pay capital gains tax with 50% reduction because I have held it for more than 12 months ($100,000-selling fee-capital costs if I can find the receipts=$54,000x0.47x1/2=$12,000). So I am left with:

$360,000-$10,000-$12,000=$338,000.

And I have to pay off my loan ($235,000), so I am left with $103,000.

So I put in $35,000 at the start and then chipped in $3,000 per year for 9 years ($27,000) and paid at least $36,000 in capital costs, so the property cost me $35,000+$27,000+$36,000=$98,000.

So this property turned $98,000 of my money into $103,000 over 9 years. Which means a property that appreciated 40% ended up losing me money (after inflation)!

Now, if it had doubled after 9 years I would instead have been able to sell if for $520,000 and would have turned my $98,000 into over $160,000 cash in my pocket after selling, which would be just fine. I have another property, but it is not doing quite as good!

So, from my experience, would it be true to say that one needs at least 4% capital appreciation each year just to break even? Or did I just pay too much initially / spend too much on maintaining it for my tenants / not charge enough rent (the market usually dictates this, not me)?

I'll update you again in another 9 years (hopefully).

Share your experiences!

Cheers