Should I Buy A Cheap Or Expensive Property?
Tom has $500,000 to spend on an investment property. He decides to buy a property worth $300,000. Claire also has $500,000 to spend on an investment property. She decides to buy a property worth $500,000. Both Claire and Tom put down a 10% deposit. This means Tom puts down $30,000 and Claire puts down $50,000. Both Tom and Claire hold their properties for 20 years. Their properties both go up by an average of 5% per year over 20 years. At the end of the 20 years, Toms property is worth $792,000 and Claires property is worth $1,320,000. Claire is $528,000 better off than Tom, although she only put down an extra $20,000 of her own money. This is the power of compound growth and buying a more expensive property earlier in your journey*.
* This is not financial advice or relevant to your situation in any way.
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