The Power of Leverage when Investing
How One Brisbane Home Delivered Massive Returns
In 2018, Zoran Solano and the Hot Property Buyers Agency Brisbane team assisted our client in purchasing a property at 5 Dowar Street, Coorparoo, for $750,000. After holding it for six years, the property was sold in 2024 for $1,320,000—a capital gain of $570,000. This case study demonstrates how property investment delivers ongoing capital growth and rental income, and how leverage can significantly amplify returns.
Lets Break it down starting with Capital Growth;
Total Capital Growth: $1,320,000 (2024 sale price) - $750,000 (2018 purchase price) = $570,000
Annual Growth Rate (CAGR):~10%
Annual Dollar Growth: $570,000 / 6 years = $95,000 per year
Weekly Dollar Growth: $95,000 / 52 weeks = $1,827 per week
This demonstrates that capital growth happens consistently over time, not just when a property is sold, something that many investors forget thoughout the ups and downs of owning an investment.
Rental Income Contribution
Average Weekly Rent: $600
Annual Rental Income: $600 × 52 weeks = $31,200
Total Rental Income Over 6 Years: $31,200 × 6 = $187,200
Gross Rental Yield: ($31,200 ÷ $750,000) × 100 = 4.16% per year
This is where most people get hung up, focusing on the rental yield as its often the cashflow of a property that is the hardest part as investors grow a portfolio.
How Leverage Multiplied Returns
Assuming the client used a 20% deposit and an 80% interest-only loan with a 5% interest rate. This meant the following calulations:
Deposit: $150,000
Loan Amount: $600,000
Annual Interest-Only Repayments: 5% of $600,000 = $30,000 per year
Weekly Interest Payment: $30,000 / 52 = $576.92 per week
Net Rental Income (after interest payments): $31,200 - $30,000 = $1,200 per year
Understanding there are certainly other costs when owning an investment such as insurance, rates, Property management fees ect, But there are also tax benefits such as deprecation and negative gearing that we haven’t factored in. This where I would suggest dont get bogged down in analysis paralysis, focus on the big picture here!
Total Return Calculation
Total Capital Growth: $570,000
Total Rental Income (after interest payments): $7,200
Total Return: $570,000 + $7,200 = $577,200
Cash-on-Cash Return: ($577,200 ÷ $150,000) × 100 = 384.8% total return over 6 years
Annualized Return: 384.8% ÷ 6 = 64.1% per year
Jump over to the image gallery to take a look at a table that compares the outcome when leverage is used in property investment and the Cash on Cash return is amazing when you consider the returns.
Key Takeaways
Leverage Maximizes Returns – Using a 20% deposit resulted in a cash-on-cash return of 384.8%, compared to 100.96% for an all-cash purchase.
Higher Annualized Return – A leveraged strategy delivered ~64.1% per year versus 16.83% for an all-cash purchase.
Rental Income Covered Interest Costs – The $600/week rent nearly matched the $576/week interest repayments, keeping holding costs minimal.
All-Cash Buyers Earn More in Rental Yield – Without a mortgage, all-cash buyers receive the full $187,200 in rental income, though their overall return is lower than a leveraged investor.
Conclusion
This case study highlights the power of leveraged property investment. By using a bank loan, the investor was able to maximize capital growth while minimizing upfront capital outlay. Even with an interest-only loan, rental income almost covered financing costs, making this a high-growth, low-cash-flow investment.
For those considering property investment, this example demonstrates why using leverage can significantly boost returns, allowing investors to build wealth faster while keeping their money working for them. If you'd like to explore investment opportunities in Brisbane, reach out to Hot Property Buyers Agency today!
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