Australian banks will lend maximum 70% on an apartment in a high density block (> 30 apartments in the block). Therefore, you will require 34.5% of the purchase price as cash to cover the 30% deposit plus the stamp duty and other purchasing costs.
The 34.5% of the purchase price needs to come from the unsecured loan from Aeon bank.
To have a neutral gearing (expenses = income):
If the interest rate on the loan is 5.59%, then the net rental yield needs to be 3.91%.
If the interest rate on the loan is 6.59%, then the net rental yield needs to be 4.61%.
interest rate ÷ net rental yield = 1.429 (ratio)
To quickly determine if a property is a worthwhile investment, calculate the net rental yield (gross income - strata - council - water - managing agent's commission) and compare to see whether it is the same or greater than: (interest rate ÷ 1.429)
When the honeymoon on the loan expires in 1 year, increase the rent proportionally to cover the increase in the interest rate.
Use any positive gearing from the property to repay the Aeon bank loan together with any surplus cash from salary income.
