When it comes to investing in property everyone’s goals and drivers are different. However, the values are similar – security, control, living life on your own terms…
We speak with home buyers and property investors day in day out.
They all from different walks of life.
They may have varying circumstances.
They may use different words, but they all pretty much want the same thing:
- Security to not rely on a ‘JOB’
- Cut down their work hours, so they can spend more time with their family, as time is flying by
- Create an income stream to supplement their income
- Financial freedom to retire early from work
- A Plan B, in case their jobs are automated as technology advances, and have control if they are made ‘redundant’
- They are able to work hard right now, and know they will burn out and not being able to work as hard
- They wish to maintain their current lifestyles when they are unable to earn the same levels of income
Lastly, and most importantly, they have worked hard for their savings and equity, but are stuck and do not have the exact next steps they need to take to build their property portfolios, which will enable the above
Property is a long-term vehicle to build wealth. It is a key vehicle where you can do the work once and let it pay off for the long term.
This blog post is about William & Olivia’s journey.
About William and Olivia: William is an engineer, and Olivia is a qualified lawyer, having successful corporate careers, in the mid-30s.
Their family income was in the low $200,000.
When they came to us, they owned TWO investment properties (one in Inner West Sydney and another in South East Queensland), had equity in one of their properties (c. $100k usable equity) AND cash savings (c. $150k savings)
Whilst they had successful careers, there was always the thought of being made ‘redundant’ in their jobs in 15 to 20 years and NOT having a Plan B was concerning for them
Technology is advancing, jobs are being automated.
There are no guarantees if you will be working in the same capacity in 15 to 20 years’ time.
William & Olivia didn’t know ‘where to next’, how to expand their portfolio effectively, so it works for them and sets up their strong financial foundations.
- They didn’t know which path to take
- Should they use equity or should they use cash savings for their next property?
- How to ensure their loans are set up tax effectively and to ensure they maximise the tax deductibility?
- Should they be doing Principal & Interest repayments or should they be making Interest Only repayments?
- What do the various repayment types mean if they ever wanted to get a future home?
- Should they fix or leave it variable?
Where they were and what they wanted to achieve:
William & Olivia wanted to continue expanding their investment property portfolio, so they could supplement their income in the next 15 years. So, their destiny is not reliant on their employability.
The biggest challenge for them was knowing how they can enable the next property purchase (and the one after that), know what is possible for them, and how to set up their finances correctly
The obvious option, like it is for most people, was to use the bulk of their cash savings as a deposit for their next investment property.
Instead, they chose to restructure their property loans so they could hold on to their cash savings for personal expenditure, such as a future home.
They also wanted help with implementing this step by step plan to accumulate further investment properties over time.
Proposed Solution with a Tailored Plan:
- Correct structuring of their existing property loans to enable not just the next investment property, but the one after that as well
- How to fund the next investment property deposit
- Decision making around using cash vs equity and WHY
- Maximise cash flow, tax benefits, and flexibility in case they decided to buy their family home
- Mapping out their plan up front, for them to acquire future investments
- Correct selection of repayment types (Principal & Interest vs Interest Only) in line with their goals
- Decision making around fixed and variable loans in line with their long term goals
Results: William & Olivia have minimised their overall cash flow (which will enable them control of their money), and are in the process of purchasing their 3rd Investment Property
They could choose to purchase their 4th and 5th investment property soon after should they wish to
Equity Released: $100,000
Investment Property 3: Proposed property in South Australia
Proposed purchase price: $400,000 at 80% Loan to Value Ratio (LVR)
Funds required: c. $100,000
Total Property Ownership: c. $1,495,000 (including proposed purchase)
Growth Projection: If the properties owned grow by a conservative 5% per annum, William & Olivia will be adding $74k to their wealth every year, compounding year on year. In 15 years, this will be more than $1,600,000 in net assets. Their property rental income will also increase over time.
Property doesn’t grow in a straight-line basis. The portfolio may grow more in one year and less in another (depending on each city’s property cycle).
What’s Next for William and Olivia?
Property Twins team will continue monitoring the value of William & Olivia’s portfolio to see opportunities around equity release, savings, and purchase of further investment properties.
As you work through your own goals, dreams, and aspirations, you can see that continuing with your property portfolio is possible for you.
At the same time, you can have the potential to go beyond the first property whenever you are ready.
This is possible by having a ‘step by step’ plan tailored to your circumstances, established upfront by the Property Twins to enable you to keep moving forward.
Note: Please ensure you always seek specific credit, tax, financial, legal or investment advice. Property Twins’ Blogs are not a substitute for personal and specific, taxation, financial, legal or investment advice.
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Note: Please ensure you always seek specific specific credit, tax, financial, legal or investment advice. Property Twins' Blogs are not a substitute for personal and specific, taxation, financial, legal or investment advice
