By Guest Blogger, Louisa Sanghera, Principal Broker,
Zippy Financial
You just have to look at the performance of the property market over the last 12 months to see that real estate can be a savvy and strategic way to make money.
Of course, booms don’t happen every year - and property prices don’t always rise.
Values have soared in the last 12 months, but now banks and economists are predicting that growth will slow down (or even go backwards).
That’s why property investing is considered a long-term play. If you have a timeline of 15 to 20 years in front of you, then you’re more likely to be in the market during periods of small or big growth. The longer you’re in the market, the better your growth prospects will be.
But how do you make that leap and get into the market in the first place?
An investment vision of buying 5 properties in 5 years
The first thing you need to know is, you don’t need to have a massive income to invest in property and achieve financial independence. Many everyday Australians earning everyday incomes are property investors.
However, what you do need is to have a deposit behind you, and a solid employment situation, so banks are confident to lend you money. This is particularly the case if you plan to go with an aggressive strategy of buying 5 properties in 5 years.
For many successful property investors, that deposit can be found in the form of equity.
→ Equity is the difference between what your property is worth and how much you owe against it.
If you’ve owned property for at least a few years, then you’ve enjoyed strong capital growth and you potentially have some equity to tap into.
For example, your situation might look like this:
• Bought a home in 2019 for $650,000
• Saved a 10% deposit and got a loan for $585,000
• You’ve repaid some principal, so the loan is now $575,000
• The market has moved and the property is worth $950,000
• Equity = current value ($950k) minus loan ($575k)
• = $375,000
You can borrow some of this equity to invest in property.
Now, if you wish to buy a number of properties as soon as possible (such as 5 properties in 5 years), then this is quite an aggressive approach.
You have to consider everything that goes into owning investment properties, including property management, taxes, finding tenants and repairs and maintenance. You can engage experts to help you with all of this, but it’s important to be aware of the investment of time and energy you need to put into being a successful investor.
You may decide to achieve your property goals at a slow but steady rate of 3 properties in the next 5 years. Or perhaps 5 properties in 10 years.
The right number of properties for you will depend on your situation, your income, your future income potential and your borrowing power. It will also be impacted by the types of properties you buy.
And you’ll only know the answers to these questions once you have a handle on your finances.
Going back to our earlier example, let’s say you have equity of $375,000. To manage your risks, you decide to access $150,000 towards an investment property. A mortgage broker crunches the numbers and works out you are in a position to borrow $600,000.
You might decide to buy one property for $750,000. Or two properties worth around $300-350,000 each.
The first step in this process is always to ascertain:
• What my financial situation and risk appetite is right now? and
• What my finance options and borrowing power allow me to do?
Find an experienced mortgage broker with deep expertise working with investors, they can help you assess your situation and structure your loans correctly, to enable you to invest in property. If you’re keen to build a large portfolio or even take your first step on the property ladder, contact a Mortgage Broker to see what’s possible.
Contact us today on 1300 855 022 or visit www.zippyfinancial.com.au
Louisa Sanghera - Director and Principal Award-Winning mortgage broker at Zippy Financial
Louisa created Zippy Financial after a 25-year career in banking, with the goal of using her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients grow their wealth through smart property financing. Whether you are looking to buy your first home, re-finance or build your property investment portfolio, Louisa and her team of experienced brokers can help guide you through the challenging maze of finding & securing exactly the right loan for you.
M: 0414083522 or 1300 855 022
E: louisa@zippyfinancial.com.au
Connect with Louisa Sanghera on LinkedIn
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