Unlocking the equity in your existing property allows investors to leverage into investment properties, and actively build your property portfolio and wealth.
A good strategy around the use of your existing equity is one of the most powerful methods employed by successful Property Investors in Australia today to build their Property Portfolio.
Naturally, the critical factor in any property investment is ensuring you have the right advice and information to maximise success through the combination of capital growth and rental yield. With this in mind, Australia has shown over the last 50 years that shrewd Property Investors can accumulate wealth far more quickly than if they wait until they have saved a new deposit to buy more investment properties.
By analysing your personal situation, a good finance broker can help you to free-up existing equity, and leverage into investment properties. To minimise your risk, every scenario and set of circumstances needs to be individually assessed. Often property owners don’t realise that existing equity in their homes can help them leverage into good cash-flow investment properties in high growth areas – and this can make a massive difference in overall wealth accumulation over time.
It’s clear in this country that the sooner we consider whether using funds and equity to invest is appropriate, the sooner we can benefit from those investments if we make them.
The trick is analysing your particular risk profile, as well as the market – and accessing the latest information around trends, prices, areas…
This includes considerations around key factors such as new infrastructure (such as transport and educational facilities) – and making sure that your investments are comfortably affordable for your circumstances.
Generally speaking, the amount of equity available to you is determined by subtracting any loan balances from the current value of your property, or investment portfolio. In order to unlock this equity, there are different ways to structure it– for example, by arranging a ‘LOC’ – a Line of Credit. This strategy gives you a pre-approved credit on unused equity – and you will then only need to pay interest on the amount you then use. A qualified Finance Broker can help you assess whether this is the right loan for you.
A LOC can be linked to only one property for example – and this allows investors to minimise the risk of tying more than one property to a new investment, or cross-collateralising. As you secure new investment properties, leveraging the value of the equity in any one property at a time – this allows maximum flexibility to access more loans. It means you can switch lenders and take advantage of any market offers, and potentially grow your wealth more quickly.
The alternative re-financing option is to use two or more properties as security for the new loan – this can mean a lower overall interest rate, reduced mortgage payments, and of course access to a greater equity amount – but it can also be more risky, because if the investment doesn’t perform as well as expected, you can risk more than one investment property, which may include your family home.
In either case, the faster you can recycle your available equity, the faster you can leverage into more properties, and build your property portfolio and wealth.
It is certainly a far swifter and more effective strategy than waiting until you have saved a new deposit.
Of course you need to be careful not to over-capitalise or over-commit – you need to have a hawk-eye view on exactly what you can, and can’t afford – and as good an insight as possible into the markets you are looking to invest in.
So – for active Property Investors, it is worth regularly organising the re-valuation of your property/ies regularly, and dealing with the best possible property adviser about your particular and unique set of circumstances.
This is what will help you maximise your opportunities on the road to financial freedom.
The information contained in this communication is general in nature and does not take into account your personal situation. Before acting on this information you should consider whether it is suitable to you in regard to your own circumstances, risk profile, your financial goals and objectives, and you MUST seek professional advice from a qualified and licensed finance broker and financial planner.