Your calculation is wrong because:
1) You don't own the $1.3m, since $800k is not your money. Hence your return should be based on your own capital which is only $500k.
2) Interest only count for the loan of $800k since easier to compare to alternative investments for your own capital of $500k.
3) Considering the above, your actual return on your $500k is much much higher than what you calculated, especially now the loan interest is about 1%, not 1.5%. That is the advantage of leverage, but also the disadvantage of leverage because your loss get magnified!
![Banghead](images/smilies/banghead.gif)
4) Is it any wonder so many citizens are still buying new launch and using whoever family names they can lay their hand on? They are carrying leverage to a "new art" level to overcome the 60% LTV for 2nd property (while 80% for 1st property), 4 years SSD, ABSD ...!
![EEK!](images/smilies/eek.png)