Looking to expand your investment portfolio but find most of your wealth tied up in your family home?
You might be able to leverage recent property market gains as equity for an investment property.
Let’s explore this opportunity.
Many Australians have financial goals, and investing in rental properties is increasingly popular. According to MLC’s Financial Freedom report, 21% of Australians aspire to own investment properties to build wealth, with this figure rising to 27% for Gen Zs and 23% for Gen Ys.
Property investment is on the rise, with lending for investment properties increasing by over 30% in the past year, according to the Australian Bureau of Statistics. The appeal is clear: rents have surged by 39.7% over five years, vacancy rates are low at 1.3%, and home values have increased by 13.5% since January 2023.
Recent property price increases could be key. CoreLogic’s Pain and Gain report shows property profits reaching a 14-year high, with homes resold in early 2024 yielding a median profit of $265,000.
How does ‘cashing out equity’ work if you don’t sell your home?
Consider this example: a house bought for $750,000 five years ago is now worth $1 million. With a loan initially at $600,000, reduced to $500,000, refinancing to a $700,000 loan could unlock $200,000 in equity for an investment deposit. Banks typically allow borrowing up to 80% of a property’s market value, so refinancing to an $800,000 loan could unlock $300,000 in equity.
This strategy allows you to become a property investor, earning rental income, capital gains, and possible tax benefits, potentially without using cash savings. If your rental property appreciates, its rising equity can fund additional investments.
There are other pathways to property investment, such as paying a cash deposit, converting your current home to a rental, or using home equity for other investments like shares or superannuation.
Understanding your options is crucial.
Interested in learning more? Contact us today to explore how you could become a property investor.
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