Positive gearing... What am I missing here?

You may have to look at Commercial for a positive yield as residential is hard to achieve today .

 

1 point that will put a reality check in to all things "positive gear" is

- Term deposits are guaranteed interest, no ifs no butts (ignoring tax) but income through rent, has

• management fees
• repairs
• vacancies
• insurance
  
• leasing fees
• advertising fees
• monthly account fees
• potential legal fees

 

Vanguard are also opening up a low-fee-cost index fund product in Australia that could be interesting for a cash-flow easy asset.

 

if u want some real yield or gains, stock market and commercial property is where it at,

 

Haven't owned a property have you?

Parking depreciation/tax refunds and unlucky repairs aside and heaven forbid, land tax....a 1 min illustration is:

Interest only scenario
Purchase prce $500,000
Rent 4% yield $20,000
Rates, strata, repairs, water etc etc $7,000
Interest only repayments @ 3.5% $ 18,200

Net cashflow pa -$5,200


P&I scenario
Purchase prce $500,000
Rent 4% yield $20,000
Rates, strata, repairs, water etc etc $7,000
P&I repayments @ 3% $ 26,308

Net cashflow pa -$13,308

Now imagine you have 5 or 10 of these babies, and they're all on P&I.

 

Lacrim, you make a good point. I would add that lowering the LVR by being on P&I does make it easier to refinance down the line. Bad for cash flow, good for equity, and being equity rich does give you more choices down the line.

 

Yeah I don't know when you hit that sweet spot, but am guessing its well after the first 10 years before you start making heavier inroads into the IP mortgages.