Our clients, Sarah & Tom are a hardworking couple. They had just completed the construction of their home Sydney. They knew they had a little bit of equity to do something, however they weren’t sure how much and what it could do.
They just wanted to get started somewhere. And whilst they couldn’t see how they will build a portfolio of multiple properties, they wanted to take the first step to start their journey.
About Sarah & Tom: Couple in 30’s with two daughters. Sarah works in admin and accounts and Tom is a corporate project manager. Their combined family income is approx. $200,000.
Where they were and what they wanted to achieve:
Sarah & Tom wanted to take charge of their financial future. What scared Sarah & Tom was the idea of having to pay this large owner-occupied mortgage for the next 30 years and not having any assets to build wealth for their family. They wanted assets working for them in parallel so they could pay off their home sooner.
They wanted someone to show them how they could maximise the equity they can access and be able to buy that first property with tax effective set up and minimised risk.
Proposed Solution with a Tailored Plan:
- Maximise the equity they can extract from their home which can be put towards the next property
- Ensuring they get a better interest rate so the reverse compounding effect of paying off their home loan is expedited.
- Analysis of various repayment types that will help Sarah & Tom so they prioritise paying off their home before an investment property (which will have tax benefits subject to their tax accountant’s advice)
- Strategise and mapping out the purchase of the 1st investment property
- Ensuring their existing home loan set up allows for future flexibility with debt recycling as they save up further
Results: Sarah & Tom are set to purchase their first investment property
Home Equity Release approx.: $100,000
Investment Property 1 Purchase Price: $450,000 at 88% Loan to Value Ratio (LVR) plus Lenders Mortgage Insurance, renting for at least $420 per week
Total Property Ownership including Home: $1.5 million approx.
Growth Projection: If the properties owned grow by a conservative 5% per annum, Sarah & Tom will be adding on average $75k to their wealth per year, compounding year on year. In 9 years, this will be more than $800k in net assets due to the compounding affect.
Property doesn’t grow in a straight-line basis. Sarah & Tom’s portfolio may grow more in one year and less in another.
What’s Next for Sarah & Tom?
Property Twins team will continue monitoring the value of Sarah & Tom’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.
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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