The two factors that determine your decision to purchase a home are (1) the amount of down payment and (2) the amount of rental income. If  you want to limit your down payment and expect less rental income because you want to leave that side of the business to a management company, don't let that put you off the project. Instead, think of the home as a savings account.

Let me explain with an example.

Let's say you have $70,000 to invest and we find a beautiful 4 bedroom home priced at $270,000.

Now, down to the math!

You will need to be looking at a mortgage of $200,000 and the repayments at 6% over a 30 year term

will be approx. $1199 per month.

The outgoings as per the previous page will be $11395 per year, giving total outgoings of $25874 per year when you factor the mortgage in.

The income, if left to a management company to book out for 35 weeks, would be approx $21,000 per year.

This leaves a shortfall of $4,784 per year, the amount of money you would need to subsidize the home.

Sounds bad? No it isn't. That is the money you are putting in to your own personal savings account every year.

Look at the table below and you will see how it works.

Value of Home assuming 6% growth per year

Equity Increase

initial price

$270,000

Initial Equity

$70,000

Year 1

$286,200

Year 1

$86,200

Year 2

$303,370

Year 2

$103,370

Year 3

$321,570

Year 3

$121570

Year 4

$340,860

Year 4

$140,860

Year 5

$361320

Year 5

$161,320

Less subsidy over the 5 year period

                                          -  $25,000

Final Equity

                                            $136,320

Increase on initial investment of $70,000

                                             $66,320

So, even with the subsidy of $25,000 you will still be getting a 14% annual return on your initial investment.

Still makes sense? I think so.