Take your typical "good" growth property within 10km of a capital as insisted by some "gurus", rental yield 4%, out of pocket is $20K pa (annual cost interest 6.5% + 1.5% costs, out of pocket is 4% of $500K). Holding couple of this and you investing journey will come to a grinding halt very quickly.
Well you just have to 'make' it add up by keep plugging in more optimistic assumptions until it does. Luckily they can be a multitude of things - whether it's future growth rates of rents, interest rates, your income, a suburb's prestige - take your pick.
One is enough but for it to work you'll need to believe in it with absolutely no doubts whatsoever.
Belief and questioning are incompatible.
The wealthy are all believers, whereas the questioners are all poverty-stricken negative stirrers who blame the world for their woes.
Hence you must believe to succeed.
Because if you believe in it, it will come true, even if the suject of your belief is a macroeconomic condition that the doubters would not think that an ordinary person could influence.
Try any or some of the following:
* Tenancy 52 weeks of the year
* Growth in rents of 5 - 10% pa (faster than CPI - but inner properties become relatively more scarce each year as the city expands so isn't high rental growth reasonable?)
* Interest rates will not rise, and if they do it means the economy is overheated which means rising incomes and rents so she'll be right
* Higher job income next year and the year after = more tax paid and maybe a higher marginal rate. So more deductions each year (you'll need to ignore the above-CPI rises in private health and education costs to make this delusion work for higher income earners)
* If the property's negative cashflow to you is costing you (say) 4% of its value each year you can sleep well knowing that next year it will probably be only 3.8% as rents rise and there will be no major mainenance issues (this ignores interest rate changes - but some will be deductible)
* If the above doesn't work, just add 4% to your capital growth forecasts, so on paper it will break even. After all you have bought well in a great area, so there is no reason why your property will not outperform the multitudes homes (*).
* If the above growth is not confirmed by sales data, reply that sales are often made by people who have some urgency to move - whether age, job move, family, marriage break up etc. Such vendors will accept lower prices and averages are not representative of 'your' place.
* If rental yields are very low - eg 3% - point out that rental yields are irrelevant as premium suburbs are often highly owner occupied. Beside its capital growth that drives wealth accumulation, not income (which is more heavily taxed anyway) and you're buying an asset for its capital growth potential, nothing else.
* Low yields reflect high price, as commanded by the market, which is always right. Such price reflects demand and the scarcity of 'quality suburbs'. And as the city expands relative scarcity of prime suburbs increases rather than decreases (unlike outer suburbs). As rental income is irrelevant, it's not valid to use yields as some measure of value, or as a means of calculating what the price 'should' be as this is far exceeded at nearly every auction every weekend. Yields are OK for commercial, but not necessarily for residental property valuation as these are bought on emotion (especially in prime areas where intangibles like school prestige are so important and can't be reduced to dollars and sense - 'what price can you place on your child's..... etc').
* It's stupid to say that properties are overpriced or unaffordable using ratios of income figures. Because if properties were overpriced they'd have no buyers. And as we all know clearance rates are high, which means that properties remain affordable to 'someone'. High clearance rates imply that there are as many 'someones' with the money as properties for sale, hence the affordability thing is a furphy.
The above should put the punters at risk, and ensure that spruikers clientele is never-ending (not many repeat customers mind you unless the spruikers also own a finance co, or better still have conned one).
(*) Refer to the 'better driver theory' - a large majority of those behind the wheel consider themselves better than average drivers even though this is statistically impossible.
