Explain this to me like im 5
Let say in put down £20,000, for a house worth £200,000 and I charge £500 in rent per month (6,000 a year).
2500 of these 6000 goes to the bank for interest, and another 1000 goes into maintenance, with the final 2500 paying off house value.
The home increases value 3% in that year, bringing its price to £206,000, as you've paid off 22,500. This brings the value of your pay-off property to 23,500.
This generates £2,000 of value through rent and 675 through increased property value. That's a 12.5% roi.
Meanwhile, if you bought the home for a full 200,000, you would receive 5000 in rent after maintenance, and 6,000 in incresed property value. This is a 5.5% roi.
That can't be right, can it?
Is renting a mortaged house somehow more efficent than renting a home you fully own?
I understand im missing out variable's like changing intrest rates, stamp duty ect but that doesn't account for a full 7% difference.