There is No Such Thing as a Free Lunch - McCarthy Group There is No Such Thing as a Free Lunch - McCarthy Group

I don’t know about you, but I like a good burger. It’s easily the most satisfying workday meal. Whether it comes from the local café or McDonalds, a burger is that perfect midday treat that helps you finish the workday strong. But what is that little mouth-watering meal really costing?

Let’s talk some costs. The cost of a burger is somewhere between $8 and $15. That’s anywhere between sugar filled, month old Big Mac and fresh, crispy bacon from the local café. The difference between the two is certainly substantial in taste and just as much so in cost, almost double in fact. Now I don’t know about you, but I just don’t have the time to make my lunch every day for work. I buy my lunch most of the time, and being a bit of a picky eater, my cost for lunch is somewhere in the region of $15 a day.

All you can eat blue grunge vintage seal

Maybe the amount I’m going through is part of the issue…

A bit of math and a few kilos later, I figure those $15 lunches turn into $75 a week, or $3750 a year! What else could I do with that money? I could take a week long holiday in Rome, I could go to university and study three subjects for half a year, or perhaps I could buy 7500 beers in the Philippines and hold the greatest party in the history of the islands. Or perhaps even crazier, I could own a property in Australia and still have some money left over.

I know, I know. The Philippines thing does sound pretty excellent. But think about it this way. The average Australian property is worth around $600,000. Imagine over 10 years, you keep putting in that $3750, slowly pushing off some of that debt put on the property, grabbing some more cash from rent and tax breaks. Suddenly that lunch money is doing something really worthwhile. Now what if the property market keeps on creeping up and suddenly that house isn’t worth $600,000 but $650,000. You sell it and pocket the remainder.

Of course, then returning to the Philippines to hold an even larger party.

Tisk

Ohhh yes

This might seem all like the plot to the next hangover movie, but it may indeed be possible for you. Let’s just look at the absolute average figures for Australian property. The average residential property is, as we said before, $600,000. Average weekly rental from residential property is around $450 each week, or $23,400 a year. The average interest rate on a $600,000 loan is around 4%, which translates to just under $38,000 a year. In this case, because the cost of the property is more than the income you can get serious tax benefits, which saves you a tonne each year, it’s not uncommon for more than $10,000 a year to be saved.

But clearly here, you are still making a loss of around $4600 a year, more if you included council fees. How to pick up the rest? Well, if you include appreciation of the property over time then you would technically not be making a loss, in that the value of your property has increased but the mortgage value is the same. If the home jumps to $650,000, then spread over 10 years, you have made $5000 a year.

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Don’t believe my maths? Do the working yourself, it all adds up!

But that is of course a technicality, you want hard figures saying that this works. The above example is the National average, everything from the value of the home, to the amount borrowed, to the interest rate on the loan. The average Australian with no prior knowledge would be at that point. But if you invest in areas that are currently cheap, but expected to grow rapidly in the future, suddenly these figures become extensively more generous to you.

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