.All this is assuming that the interest rate is going to remain at it's current level
It's also assuming that house prices crash 25% and then sit there permanently
In seven years time you would have raised the rent 6 times, and you would have reduced the loan through 6 years of principle payments.Granted that in the next few years it will remain here or lower. That's not to say that in 7 years time interest rates don't hit 10%+. Then what?
Not to mention that for interest rates to hit 10%, the RBA must be trying to calm rampant inflation, which would have put upward pressure on the capital value of the house and the rental income.
.Rental yields don't move in tandem with interest rates
True, they tend to just go up. interest rate flucutate both up and down.
.Sure if rates are higher so to is inflation usually
Inflation would be causing upward pressure on rents along with every things else.But if inflation got to out of hand land lords wouldn't be able to increase rent accordingly.