I am really confused when it comes to how to achieve positive cash flow in IP even with this low interest rate.
For example if you buy a property of $300k with 7% interest rate (current 5yr fixed rate), rental expense being 25% of rental income, in order to cover interest payment of 21k,
21k / 75% = 28k should be rental income, which is about $560 pw.
And I think there is no way you can charge $560 rent on $300k property.
I just finished reading 'more wealth from residential property' and from my understanding, what the book is saying is 'keep buying IPs with IO loan, wait for CG while paying interest on loan, then sell some IPs to get ride of debt'.
However, as you accumulate more IPs, you need to deal with increasing pressure from negative cashflow.
Is it what most investors are doing?
Sorry maybe I am asking a dumb question, but as you guess, I am totally new to all these things and trying to learn.
Any advice if I got this wrong?
Thanks in advance
For example if you buy a property of $300k with 7% interest rate (current 5yr fixed rate), rental expense being 25% of rental income, in order to cover interest payment of 21k,
21k / 75% = 28k should be rental income, which is about $560 pw.
And I think there is no way you can charge $560 rent on $300k property.
I just finished reading 'more wealth from residential property' and from my understanding, what the book is saying is 'keep buying IPs with IO loan, wait for CG while paying interest on loan, then sell some IPs to get ride of debt'.
However, as you accumulate more IPs, you need to deal with increasing pressure from negative cashflow.
Is it what most investors are doing?
Sorry maybe I am asking a dumb question, but as you guess, I am totally new to all these things and trying to learn.
Any advice if I got this wrong?
Thanks in advance