Our clients, Alice & Alex are hardworking Australians. They owned investment property. They wanted to badly buy themselves a family home, however they weren’t sure how to go on about making it happen.
About Alice & Alex: Couple in mid to late 30’s with three kids. Alice works in admin and Alex is a sales manager. Their combined family income is approx. $140,000.
Where they were and what they wanted to achieve:
Alice & Alex wanted to buy themselves a family home. The investment property they owned had gone backwards in value. They had spoken to a few professionals, however the advice they were given was high risk on how to set up their investment and subsequently structure the next home purchase.
Also, having a unique job situation, they wanted to see how they could maximise borrowing and needed someone to hand hold them through the process.
Proposed Solution with a Tailored Plan:
- Maximise the equity they can extract from their investment property which can be put towards the next home purchase
- Ensure the investment loan is structured tax effectively, due to the equity being pulled out to be used towards their owner-occupied property
- Ensuring they get a better interest rate on the owner-occupied property (as opposed to when we first got the pre-approval for 91% borrowing plus LMI versus adjusted borrowing of 90% borrowing plus LMI by the time they found the property due to increased funds by an additional $5,500 in savings. This alone saved them $4,600 approx. per annum in interest and they also saved $8,000 in LMI they would have otherwise paid
- Minimising risk by keeping both property loans separate and not tying them together. This way they have the flexibility to sell one property or the other OR refinance one property or the other depending on the increase in values
- Analysis of various repayment types that will help Alice & Alex so they prioritise paying off their home before an investment property (which will have tax benefits subject to their tax accountant’s advice)
- Ensuring their existing home loan set up allows for future flexibility with debt recycling so they can invest further as they save up
Results: Alice & Alex purchased their next home
Investment Property Equity Release approx.: $23,000 + Savings available of $41,000
Next Home Purchase Price: $540,000 at 90% Loan to Value Ratio (LVR) plus Lenders Mortgage Insurance
Total Property Ownership including Home: $925,000 million approx.
Growth Projection: If the properties owned grow by a conservative 5% per annum, Alice & Alex will be adding on average $46k to their wealth per year, compounding year on year. By year 5, conservatively they will have sufficient equity to purchase their next investment property or even two. This is of course dependent on their family income as well at that point in time.
Property doesn’t grow in a straight-line basis. Alice & Alex’s portfolio may grow more in one year and less in another.
What’s Next for Alice & Alex?
Property Twins team will continue monitoring the value of Alice & Alex’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.
If you are a first home buyer, upgrader, looking to refinance or to buy an investment property Book a Kickstart Call with the Property Twins Team
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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