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Property is a long-term vehicle to build wealth. It is a key vehicle where you can do the work once and let it pay off for the long term.

When Peter & Steph reached out to us, they just owned a unit in Melbourne.

About Peter & Steph: Couple in early 30’s with one child. Peter is an IT professional and Steph works in child care. Their family income is $140,000.

When they came to us they also had $100k in cash savings.

Where they were and what they wanted to achieve:

Peter & Steph wanted to build an investment property portfolio so they can have options and for Steph to live a more relaxed life rather than working pay cheque to pay cheque in the long term. They wanted their money to work better for them and they chose the investment property path as the way to build their wealth, by ‘doing the work once’ and it reaping benefits in future.

With limited equity in their home, the biggest challenge for Peter & Steph was knowing how they can enable the next property purchase, whilst maintaining their savings. 

The obvious option, like it is for most people was to use all their cash savings as deposit for their first investment property. Instead they chose to pay Lenders Mortgage Insurance (LMI) on their home and draw down the equity for their first investment property purchase.

They also wanted help with implementing this step by step plan to accumulate further investment properties overtime

Proposed Solution with a Tailored Plan:

1. Correct structuring of their existing home loan to enable not just the first investment property, but the next as well
2. Maximise equity release from their home to fund first investment property deposit
3. Maximise cash flow, tax benefits and flexibility to pay off the home quicker
4. Mapping out their plan up front, for them to acquire investment property 1
5. Debt recycle strategy to use their savings for investment property 2 purchase

Results: In less than 3 months, Peter & Steph went from just owning their home to purchasing their first investment property 

Home Equity Release: $77,000

Investment Property 1: House in a high growth QLD suburb
Purchase Price: $391,000 at 90% Loan to Value Ratio (LVR) including Lenders Mortgage Insurance (LMI)

Funds Used Up: $76,000 approx. 

Peter & Steph have an additional $100,000 in savings and growing to enable their next property purchase. These savings will be used towards the 2nd investment property, in line with plan tailored to Peter & Steph’s circumstances.

Total Property Ownership including Home: $770,000 

Growth Projection: If the properties owned grow by a conservative 5% per annum, Peter & Steph will be adding $38k to their wealth every year, compounding year on year. In 10 years, this will be more than $484,000 in net assets. At the same time Peter & Steph’s property rental income will increase overtime.

Property doesn’t grow in a straight-line basis. Peter & Steph’s portfolio may grow more in one year and less in another.

When Peter & Steph purchase their 2nd investment property using the equity from their home, they will be adding another compounding growth assets.

What’s Next for Peter & Steph?

Property Twins team will continue monitoring the value of Peter & Steph’s portfolio to see opportunities around equity release, savings and purchase of further investment properties.

As you work through your own goals, dreams and aspirations, you can see that starting with your first investment property is possible for you. At the same time, you can have the potential to go beyond the first property whenever you are ready. 

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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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

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