Do you remember how long and hard you had to save for your deposit to buy your own home? And today it’s just about as hard as it’s ever been to do this - especially if you live in Sydney or Melbourne. So how on earth do so many people manage to grow a portfolio of two or more properties?
The answer is equity. It’s the portion of your property which you actually own, and it grows quietly and steadily for you over time. Aside from keeping the rain out, growing equity has to be one of the greatest benefits of the place you call home.
And the best thing about your equity is that it doesn’t just have to sit there - you can actually use it. And it makes investing in property much easier and more affordable than you may think.
Equity is the part of your property which you own. It’s simply the difference between the value of your property and the amount you owe the bank.
Say your home is worth $550,000, and your mortgage is currently $250,000. You have $300,000 in equity. And as your property appreciates in value, and as you steadily pay off more of your mortgage, your equity grows.
Many homeowners are sitting on a huge opportunity to grow their property portfolio, and may not even realise it, because part of that $300,000 in equity may actually be accessed and utilised for your own benefit.
Your equity is yours - and you can get it working hard for you.
The best way to get access to equity may vary depending on your financial circumstances (and a qualified and experienced finance specialist can help you to find the best way for you). However it generally amounts to using this equity as a deposit towards your next property.
While they may not offer much love to their customers, the banks do love property. And you can use that to your advantage.
There are often various lending options for people with enough equity in their existing property or properties to use it towards another. This allows you to use other people’s money (in this case, the bank’s) to secure more asses of your own, with each property growing in value, earning you an ongoing income income, and more and more equity into the future. It’s a beautiful thing!
Nothing in life (worth doing) is without risk. We always ensure that our clients have access to good advice and information from qualified, independent and experienced finance specialists, to best understand their options and what’s involved.
For example, you need to be sure not to overextend yourself, and keep you property investment strategy financially comfortable. Ensuring you have basic safety nets and contingency planning in place is essential to help protect yourself, and your assets.
No! And this is the best part. When it comes to property, time is your best friend. So being able to grow your portfolio sooner rather than later will help you to enjoy more growth in the value of your properties over a longer period of time.
Strangely though, some out there still hold onto the outdated idea of needing to pay off home before looking at anything else. But it’s a fast road to nowhere when it comes to growing your property assets. Imagine having to wait 30 years until your home is paid off, only then find yourself with very little time to grow your investment property portfolio before retirement is upon you.
Compare this to getting into the market 20 or 30 years before retirement, and letting your properties do their job over the medium to long term.
The added benefit of course is that as you grow your property portfolio, the rental income that they earn for you will steadily increase over time. This extra income can actually provide you with an opportunity to pay down the mortgage on your own home sooner than you’d otherwise be able.
Turns out getting that next property and creating an income for your future may be easier than you thought.