Part of the allure of property as an asset class is that with every dollar of your own capital and an 80% mortgage loan, you can pretend you own 100% of the property. So, if the property’s value rise by 10% over a year, you earn a windfall profit of $5 (10% x $5). And you can brag to your friends that you made return of 500% ($5 over $1) in just one year.
Leverage or borrowing money to own an asset is the name game in property. Of course, borrowed money has to be repaid (with interest). There are also other costs of owning a property. If it’s a condo, there are regular maintenance fees to pay. And don’t forget, you also have to pay property tax. These costs must be accounted before you can say for sure that your property has been a great investment. From my experience ......