Our clients, Sarah & Sean are a hardworking couple. When they came to us, they owned a home and two investment properties.
About Sarah & Sean: Couple in 30’s with two children. Both Sean & Sarah work in the health care space. Their combined family income is approx. $165,000.
Where they were and what they wanted to achieve:
The existing loan structures were poorly set up (cross collateralised) and high risk. The current set up by their bank wouldn’t allow them to move forward with further acquisitions. Fortunate for them they had been good savers as well as had actively worked on reducing their owner-occupied debt that ultimately helped their borrowing.
They are a unique case study and what was going for them was the low owner-occupied debt as well as the desire to keep moving forward.
They wanted someone to show them how they could maximise the equity they can access and be able to keep moving forward whilst minimising the risks.
Proposed Solution with a Tailored Plan:
- Refinance home and one investment property to uncross collateralise the properties and structure correctly to ensure they have trail for their accountant for tax benefits (one investment property was left with the original lender until the fixed term completed) to access ~$44,000 in equity
- Refinance the 2nd investment property to unlock further equity of $80,000
- Purchase Investment property #3 for $483,000
- Purchase investment property #4 for $815,000 – 6 months later tap into ~$89,000 in equity
- Purchase investment property #5 for $342,000
- Plans to purchase investment property #6 for around $450,000
Note that investment property 3, 4 and 5 were purchased within 9 months of each other.
We ensure they get a better interest rate as part of the existing portfolio restructure.
The goal has been to strategise and map out the purchase of 3rd till 6th investment property. They may be able to purchase additional properties once they save up. Tapping into equity gets harder as you exhaust borrowing capacity. So, their existing home loan is set up allows for future flexibility with debt recycling as they save up further
Results: Sarah & Sean will soon be completing the acquisition of their 6th investment property. The portfolio has grown in value.
Total Property Ownership excluding Home: $4.2 million approx.
Growth Projection: If the properties owned grow by a conservative 5% per annum, Sarah & Sean will be adding on average $68k to their wealth per year, compounding year on year. In 10 years, this will be more than $800k in net assets (excluding their home) due to the compounding affect.
Property doesn’t grow in a straight-line basis. Sarah & Sean’s portfolio may grow more in one year and less in another.
What’s Next for Sarah & Sean?
Property Twins team will continue monitoring the value of Sarah & Sean’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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