Developing your property portfolio

There’s no place like home. More so when you own! As a member of the mortgage club, you might be wondering what your next steps should be. Since you already understand the graft, time and sacrifice real estate demands, maybe building a property portfolio is for you? It can be a safe place to park capital for you and your children.

How to use the equity in your home

Home equity is the investor’s friend. It gives you the leverage to buy a better house or invest. But what is it?

Equity is the difference between what you owe and what your property is worth. The more neighbourhood prices have risen since you bought, the bigger your delicious slice of equity could be!

To calculate it, start with a property valuation. A real estate agent can do this for you, or a bank. Depending on your situation, you could borrow up to 90% of your property’s value.

If your equity looks more like crumbs than the cake you expected, consider growing it. Commit to larger monthly payments, open an offset account to reduce interest, or do a clever renovation.

What’s your property investment strategy?

Are you looking for rental yield—based on factors like property type, location and the economy? If you’re on a high income and the mortgage is covered, do you prefer capital growth? Ideally, you’ll find both. Or will you negatively gear for tax reductions? NB: Only for a short time—PM Ardern is not a fan! Do get professional tax and financial advice. As the old maxim goes—pay peanuts, get monkeys.

Research phase

Once you’re ready to rock, research begins. You’ll learn what markets are hot and not; and pick an area. Then rental returns, demographics, median prices, clearance rates… What will your rent to repayment ratio be? Can negative gearing work? Are public transport upgrades or new schools coming which will drive capital appreciation? Is an overlooking high rise planned for the next street? Research is your new busy!

Getting finance

A good adviser will help assess your equity, know how to unlock it and, suggest the way forward. They’ll also help with pre-approval—a lender’s in-principle agreement that you can borrow to buy property. There’s no guarantee, hence ‘pre-approval’, but there is peace of mind! So get in touch to learn how I can help you.