Our clients, Ryan & Rachel are a hardworking couple.
They owned their home and had paid it down significantly. This is besides them building a healthy savings if they needed to use for further investment. They owned an investment property already.
They just wanted to ensure their finance was structured correctly so they could pay off their home loan fast, maximise tax savings, minimise risk and maximise opportunity for themselves and their family.
About Ryan & Rachel: Couple in mid-30’s to 40 years old with two children. Ryan works in IT and Rachel works in administration. Their family income is around $165,000 approx.
Where they were and what they wanted to achieve:
Ryan & Rachel wanted to take charge of their financial future and invest confidently while they are young. 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. They were able to tap into around $330,000 in equity.
- Ensuring they get a better interest rate so the reverse compounding effect of paying off their home loan is expedited.
- Restructure their investment property to maintain the tax effectiveness of their loan so any savings could be re-directed towards paying down their owner-occupied property
- Analysis of various repayment types that will help Ryan & Rachel 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 their 2nd, 3rd and 4th investment properties
- Ensuring their existing home loan set up allows for future flexibility with debt recycling as they also have additional savings, besides equity they have tapped into
Results: Ryan & Rachel are set to purchase their second investment property
Home Equity Release approx.: $330,000
Investment Property 2 Purchase Price: $415,000 at 80% Loan to Value Ratio (LVR) plus Lenders Mortgage Insurance, renting for at least $465 per week [Equity Used approx. $100,000]
Investment Property 3 Purchase Price: $480,000 at 80% Loan to Value Ratio (LVR) plus Lenders Mortgage Insurance, renting for at least $420 per week [Equity Required approx. $113,000]
Investment Property 4 Purchase Price: $480,000 at 80% Loan to Value Ratio (LVR) plus Lenders Mortgage Insurance, renting for at least $420 per week [Equity Required approx. $113,000]
Equity Used: $326,000
Total Property Ownership including Home: $2.62 million approx.
They would comfortably be able to acquire all three purchases within a matter of 3 to 6 months (depending on how quickly they move on this)
Growth Projection: If the properties owned grow by a conservative 5% per annum, Ryan & Rachel will be adding on average $164k to their wealth per year, compounding year on year. In 9 years, this will be more than $1.64m in net assets due to the compounding affect.
Property doesn’t grow in a straight-line basis. Ryan & Rachel’s portfolio may grow more in one year and less in another.
What’s Next for Ryan & Rachel?
Property Twins team will continue monitoring the value of Ryan & Rachel’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.
Ryan & Rachel already have a plan to purchase their 3rd and 4th investment property as well.
Ryan & Rachel’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 loans.
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.
To Get Started: Schedule A Chat with the Property Twins Team Join Our Exclusive Facebook Community of 6,000+ Property Investors: Property Addicts Australia Join our Exclusive Search & Select The Right Property in 90 Days 5-Day challenge
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
