This is something that has been bugging me for a while and I can't quite get my head around it. Yet there's clearly an answer because many people do it; or at least, seem to do. So if this seems like a silly question with an obvious answer I apologise in advance, but as the saying goes, the only silly questions are the ones not asked. Feel free to chime in at any point if I've made incorrect assumptions or just plain made a mistake. I'll use a simplistic property scenario to illustrate. Let's say you decide to buy some investment properties. You find a suitable place for $350000. You borrow 80% of the value, which means you have to come up with a 20% deposit of $70000. Maybe that $70k comes from savings, maybe it's borrowed against your existing PPOR, it doesn't matter, you still have to get it from somewhere. Interest on the $280000 loan (80% of 350k) @ 9.5% comes to $26660pa. You then get rent at $400pw. That gives you a yearly rental return of $20800. Net loss for the year = -$5860. Assume an income of $100k. Net on that is $72900, take off the loss from the IP and you end up with a net income of $69384. So the property has cost you $3516. That's $3516 that you have to find out of your own pocket, right? Obviously you're hoping for long-term capital growth to counter the losses you incur along the way, but you still have to be able to afford those losses along that way in the first place. Which is kind of where I'm heading. Now let's say you want to purchase a second IP, and for this exercise it's identical to the first: $350k purchase, $400pw rental return. And this is where I start to run into the mental brick wall. To whit: You need another $70k deposit to purchase the 2nd property. That means you either need another $70k cash lying about, which I suspect is unlikely, or you borrow against something else to get it, which now means you're not only looking at the yearly loss but maintaining a now $140k loan just for the deposits. Additionally, your income has now, with the yearly loss from the 2nd property, dropped to $65868, or a $7000 hole in your pocket if you like. For your average person burning $7000 a year is not something you take lightly, and for this example I've been quite optimistic with a high rental return on a lower priced property. So after all that preamble to show you what my understanding of the situation is, my question is this: how do people actually afford multiple investments? It could be borrowing for shares or for property, it doesn't matter, I just used property for this example. But somehow you still have to find the money to support the loan and the ongoing losses before you can claim the capital growth pot of gold at the end. And it doesn't take long before my calculations show that your ability to do this becomes severely eroded. Yet people clearly do own multiple investment properties and/or large geared margin loans and they're not inordinately wealthy themselves. So how do they do it? Are they living on the bones of their butt to support their investments or is my understanding fundamentally flawed? Sorry for the waffle! I'm just trying to get my head around it all.