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Been crunching some numbers and was interested to see I need cap gains of around 1.5% at 8% interest rate on some of my properties for them to be break even, after that they cost me money.
So who else has done something like this and where do you stand?
Hi bigtone-it was a very quick and dirty back of the envelope type calc..
Basically...Total property income less total property expense plus negative gearing saving = x
Then I just looked at how much cap gains I need per year in order to match the loss of x per annum...
Ours will be negatively geared, so my break even point would only occur if rates dropped back down to 'historical lows' again
huh im confused? I its negatively geared you are already loosing money every year. As a result you are, like me, counting on capital gains to make up at least the difference...so at current or projected interest rates (I used 8% interest only) what growth do you need to off set the losses?
Excl. PPOR, my IP's (at their current fixed rates) need 0.41% - I think they'll swing that. But yes, 'buffer' is definitely the wrong terminology for the question asked.
Well my PPOR comes in at -0.5% (postively geared if we rented it).
My (yet to be built) IP (I am counting my chickens here ) comes to approx 1.7%
I find it more interesting to know what the break even point is for the PPOR as it stands, i.e. to compensate you for the amount of interest you are paying.
It asks, and maybe answers the question: Is it worth owning your own home if you need to borrow to be able to do it?
Mines at 4%, but I have half of the loan offset, so if i was paying full interest, it would have to increase 8% pa to break even, which is pretty high.
Mines at 4%, but I have half of the loan offset, so if i was paying full interest, it would have to increase 8% pa to break even, which is pretty high.