Use the guiding questions to analyse the profit from the following scenario
Imagine you have $200,000 to buy an investment property that is expected to grow in value by 7% p.a. Paperwork and tax cost a total $2000. Each year, the property has costs of $1000 (e.g. land tax, rates and insurance) and earns a rental income of $2500 per month. 

Questions

What is the initial amount you can spend on a residential property after taking into account the buying costs?

What is the total net income from the property per year after annual expenses have been considered?

By considering only the property's initial capital value, find the expected value of the property after 10 years.

By considering the rise in value of the property and the net income, determine the total profit after 10 years.

Would investing in a property be more profitable than having $200000 in a bank savings account with 8% interest, compounded annually? 

Determine how much is the net gain or loss if you would still buy the same property as above, but your $200000 was a loan from the bank at an interest of 8% p.a

Answer rating: 100% (QA)

Lets break down the analysis step by step 1 Initial Amount for Property Purchase You have 200000 Buy... View the full answer