Whats your buffer?
- Thread starter dunno
- Start date
As Steveadl pointed out, you really need to include potential rental income for it (as that is what you're saving by owning it not renting it). By including market value rent for mine and all standard holding costs, basing interest at 8%, my capital gain required comes in at pretty much 0% so I guess it's netural. PPOR is 0% and IP is 0.39%, maybe I am in a better position to buy IP2 than I thought.
Not including rent is giving you a false figure.
eg. a $250k PPOR with $250k mortgage @ 7% = $17.5k + $2k (water and council) = $19.5k holding costs
So yes, that's 19.5/250 = 7.8% rise needed per year.
But if you rented it out instead, you wouldn't have $0 cost of living elsewhere. Your rent elsewhere if you didn't own your PPOR might be $280pw = $14,560 per year. You need to take that off your PPOR cost, so to own your PPOR as opposed to renting somewhere else is actually only costing you an extra $4,940 per year - so really only 1.98% rise needed per year.
Simplified example, but it gives you the gist.
eg. a $250k PPOR with $250k mortgage @ 7% = $17.5k + $2k (water and council) = $19.5k holding costs
So yes, that's 19.5/250 = 7.8% rise needed per year.
But if you rented it out instead, you wouldn't have $0 cost of living elsewhere. Your rent elsewhere if you didn't own your PPOR might be $280pw = $14,560 per year. You need to take that off your PPOR cost, so to own your PPOR as opposed to renting somewhere else is actually only costing you an extra $4,940 per year - so really only 1.98% rise needed per year.
Simplified example, but it gives you the gist.
