Are you looking to expand your investment portfolio but have most of your wealth tied up in your family home? You might be able to unlock recent gains in the property market as equity when investing in property. Here’s how you can do it (learn more about maximising equity for retirement here).
Investing in rental property is a popular financial goal among Australians. MLC’s Financial Freedom report states that over 21% of Australians aspire to own investment properties to build wealth. This interest is even higher among younger generations, with 27% of Gen Zs and 23% of Gen Ys expressing the same aspiration.
The trend is evident in the statistics: lending for investment properties has increased by over 30% in the past year, as the Australian Bureau of Statistics reported.
The appeal of property investment is clear. Rents have surged by 39.7% over the past five years, rental vacancy rates are incredibly low at just 1.3%, and national home values have risen by 13.5% since January 2023.
Recent property price increases can provide a valuable opportunity. CoreLogic’s latest Pain and Gain report shows that property profits have reached a 14-year high, with homes resold in early 2024 achieving a median profit of $265,000.
But how can you leverage these gains without selling your home?
Here’s a practical example:
Suppose you bought a house for $750,000 five years ago, and its value has since increased to $1 million. If you originally took out a $600,000 loan and have paid it down to $500,000, you can refinance the remaining balance. By refinancing to a $700,000 loan (70% of the new market value), you could access $200,000 in equity. This equity could serve as a deposit for an investment property.
Banks typically allow you to borrow up to 80% of your property’s market value. So, if you refinance to an $800,000 loan, you could unlock $300,000 in equity. This approach lets you enjoy the benefits of property investing—such as rental income, capital gains, and potential tax advantages—without dipping into your cash savings.
Moreover, if your investment property appreciates in value, you can use the increased equity to invest in additional properties.
Other pathways to becoming a property investor include:
- Paying a cash deposit if you have the funds.
- Retaining your current home as a rental property after purchasing a new home.
- Exploring other investment options, such as investing in shares or boosting your superannuation with your home’s equity.
Understanding your options and choosing the strategy that best fits your situation is essential. Want to learn more? Contact us today to discover how you could start your journey as a property investor.
You might be interested in understanding more about home equity and its relation to property investment. Speaking of property investment, exploring the real estate market in Australia can provide valuable insights into current trends and opportunities. Additionally, if you’re curious about financing options, check out this article on mortgages to learn about the different types of loans you might consider when tapping into your home’s equity. These resources can enhance your understanding and assist you on your journey to becoming a property investor!
Disclaimer: This article is for informational purposes only and does not constitute tax or financial advice. It does not consider your situation and may not be relevant to your circumstances. Before making any financial decisions, seek professional advice tailored to your situation. This content is protected by copyright and intellectual property laws and cannot be modified, reproduced, or republished without written consent.
