I understand buy and hold and the benefits (and disadvantages). I've started down this strategy, but the endgame is confusing me - I don't quite get how to LOR (live off rent). I'll give an example: Let's say I purchase an existing (fairly old, not new) $500,000 property, 80% LVR, 4.6% interest. Rent for $500/wk. Yield is thus 5.2%. My calculations show it's negatively geared slightly, perhaps about $50/wk - income 500x52 = $26,000 - expenses total about 40% of rent = $10,400 - repayments $18,400 Let's say I've only got 10 years to set up for LOR. Long term rental growth averages about 3% pa. So rent in 10 years = $672pw = $35,000 approx. Expenses have gone up too - admin fees, rates, etc. So 40% is still valid = $14,000. If interest rates haven't increased (!), then repayments are still $18,400. Income $35,000 - expenditure $32,400 = $2,600. So the property is now positively geared - yay. But $2,600 / 52 = $50pw income from this property. That's nowhere enough to LOR! Even 10 properties like this - pretty close to impossible to someone starting today with serviceability - would only be $500pw income. So how does someone LOR? It appears that CG doesn't seem to enter into the matter - CG could have been zero or huge, but doesn't change the equation. Of course huge CG could suggest rental growth of 3% is low, but as a 10yr average it's pretty close to the longer term average (which is also based on income growth). The only options for 10yrs are - to pay down the loan, lowering the repayments. - increase the rents way above average (unlikely to be substantially different) - lower expenses (very unlikely to be able to substantially alter this) Paying down the loan by $100,000 would increase the income from the property from $50pw to $138pw - still needing 7-8 of these properties to get to $52,000 of income. But costing $100,000x7 in loan reductions! So how do people reduce their loans soooo much? Or, is a buy-and-hold strategy really only good for initial high-yield (say 7%+) and thus more likely in areas of lower CG? As far as I can see, an initial mid-yield (5%) property with likely higher CG isn't really suitable as a basis for 10yr LOR. Have I got something wrong with that thinking?