Was wondering how much holding cost is a property worth to keep?
I think this depends entirely on:
1) Whether you can afford to keep putting in this amount each week, and
2) Whether you anticipate capital growth that significantly exceeds this cashflow shortfall.
Elaborating on the second point:
i. Firstly, you do need to
at least cover the cashflow shortfall, ie if it costs you $5K per year to hold, you need to anticipate CG of at least $5K.
ii. You have to get a decent return on the equity that you have invested in the property. So if you have a $320K debt on a $400K property, in simple terms* you have $80K of your money invested. You would want to get at least 20% return on your equity, in my opinion, so at least another $16K CG to cover a decent ROI.
[*It's actually a little more complex than this; if you can wrap your head around it, I calculate "my equity" by figuring out what I'd have left over if I sold the property. So you have to subtract agent's fees, CGT already accumulated, etc. This gives a real figure of the equity you'd have to invest elsewhere if you sold this property, which is what's important when considering the opportunity cost of holding this property.]
iii. Additionally you're accumulating a future CGT debt of about 20% of the increase (conservatively), so in addition to the $5K + $16K = $21K, you need to divide by 0.8 = $26,250, to ensure the CGT is covered.
So on a $400K property owing $320K and costing you $5K per year to hold, you need to be anticipating capital growth of at least $26250/400,000 = 6.56% pa. The dollars it's costing really are irrelevant, if you can afford the cashflow, and the return is good.
