Our clients, Jane & Will are hardworking Australians.
When they came to us, they owned an investment property in a declining market, coupled with the tax deductibility of the property impacted. They had growing savings (parked in the re-draw account of the property).
They were renting at the time and were badly wanting to get into a family home.
They went from owning just their investment in Western Sydney to their home purchase in 2 months. There by owning two properties and $925,000 in property exposure for wealth creation long term.
About Jane & Will: Couple in mid to late 30’s with three children. Jane is an admin officer and Will is sales consultant. Jane was working in two casual jobs. Their family income was $139,000.
Where they were and what they wanted to achieve:
Jane & Will wanted to badly get into their family home. After watching the Sydney market grow so much and then go backwards, they wanted to take active steps to tap into the equity of this investment so they could put deposit into their home purchase.
Additionally, they wanted to maintain the tax effectiveness through correct loan setup. This would provide them with more control and a better future for their children.
Challenges they had:
> Before they came to us, they were recommended to cross collateralise the properties. Which was high risk with the bank holding control on their properties.
> They had tax & non tax deductible debt mixed up due to incorrect use of redraw accounts
> Jane had two casual jobs and income from both was required to put towards the borrowing
Correct structuring on the outset meant higher lenders mortgage insurance (LMI) on their home due to limited deposit available. However, the equity pull, coupled with their growing savings, a larger deposit meant they halved LMI by the time they found the property.
Proposed Solution with a Tailored Plan:
- Correct structuring of their existing invest loan so they maintain the tax effectiveness and minimise risk by NOT tying the properties together
- Maximise equity released from the investment property to fund deposits for their family home
- Minimise LMI by ensuring they put adequate deposit to halve the LMI on their home purchase
Results: In less than 2 months, Jane & Will went from just owning their investment to purchasing their home with low risk structures & future potential to add further investment properties as their income increases
Investment Property 1: Unit in Western Sydney, value of $380,000 – refinanced to a suitable lender that allowed equity pull, with focus on maintaining tax effectiveness
Home Equity Release: $23,000 + Savings of $41,000
Next Home: House in the central coast
Purchase Price: $545,000 at 90% Loan to Value Ratio (LVR) with LMI added to the loan
Total Property Ownership including Home: $925,000
Growth Projection: If the properties owned grow by a conservative 5% per annum, Jane & Will will be adding $550k plus to their equity position with potential to add further investment properties to their portfolio.
Property doesn’t grow in a straight-line basis. Jane & Will’s portfolio may grow more in one year and less in another.
What’s Next for Jane & Will?
Property Twins team will continue monitoring the value of Jane & Will’s portfolio to see opportunities around equity release and further investment properties which are possible for them, given the planned set up of their existing properties.
Jane & Will already have a plan to purchase their 3rd property as they save more and build equity in their home and the existing investment property.
Jane & Will’s current home loan structure is strategically set up to allow them to pay off their home loan faster and maintaining tax effectiveness of their investment loan.
As you work through your own goals, dreams and aspirations, you can see that acquiring one and more investment properties is about having a ‘step by step’ strategy laid out to enable you to keep moving forward.
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.
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