Shares vs. Property -> I went with property and kind of regret it - Hi all,

One of the most common discussions on here is investing in shares vs. property, in the last 6 months the amount of people advocating for property has decreased significantly which I assume to be 2* ... See More to rising interest rates.

My partner and I recently purchased an IP, it serves 2 purposes - a place to invest and a place to maybe oneday move to. We discussed in depth the benefits/negatives of buying this place vs. just investing in shares. Overall what got property over the line was the power of leverage and being able to lock in a future home at the current price. However, the rising interest rates has made the numbers less than ideal. We will continue to hold and cross our fingers that we see capital growth as the cost to sell and reinvest in shares is too high.

I thought sharing some real numbers on what I consider to be a pretty standard IP would be useful, mainly for you to make fun of us but also to see just how much these properties can cost on an ongoing basis in the current climate. And also as I've noticed very few people put up real-life examples of the costs to hold an IP.

* Purchase: November 2022
* Property: 3Br / 2 bathroom / regional VIC
* Cost: 770k
* Loan Structure: 90% LVR IO no LMI (due to our professions), 45k equity taken out of PPOR for purchase costs (as IO loan) - deposit paid in cash (but via debt recycling against our PPOR making it deductible)

Income | Amount
------|------
Rent | $1717 monthly



Expenses | Amount
--------|------
90% LVR IO Loan | $3200
45k IO loan | $0
Deposit loan (debt recycling) | $800
Rental Manager | $113
Insurance | $96
Maintenance | $650
Land Tax | $60
Council Rates | $200

* The maintenance is an estimate based on an assumption of maintenance being 1% of the properties value per year.
* You could also argue the inclusion of the deposit loan is not neccessary as we would be paying it regardless of if we purchased the property. (we used our deposit amount to pay down a split from our PPOR loan then redrew it so make it deductible).

The final numbers are:


| Amount
--------|------
Cash Income | $1717
Cash Expenses | $5119
Cash Loss | -$3402
Depreciation | $117
Post-tax loss | -$2188
Post-tax loss (without deposit loan)| -$1388

I've included the bottom row as if we didn't purchase this IP we would still be paying the deposit loan, so it isn't a "true" expense the IP incurs.

So overall, quite a large loss per month, would be even worse if it weren't for debt recycling and the governments favourable treatment of property from a tax PoV.

If I could go back in time and not invest in property and instead choose shares - I'd probably say yes, but who knows, in 5-years the capital growth may offset the expenses we have incurred. However, we are lucky in that the only costs so far have been money, we have had a great property manager and some excellent tenants so no non-money headaches (so far).

Hope the above numbers gives others some insight that might assist in their own decision making.

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