All investments carry some level of risk to go with the reward. In property risk rises where finance is set up incorrectly. It can stop you dead in your tracks and prevent you from growing your wealth beyond your home or first investment property.
That’s why 71% of property investors in Australia only own ONE investment property.
When Jason & Anna reached out to us, they owned a home and an investment property in Western Sydney.
About Jason & Anna: Couple in mid to late 40’s with one dependent child. Jason is a business development professional and Anna works in auditing. Their family income is $180,000.
Where they were and what they wanted to achieve:
When they came to us, Jason & Anna’s home and investment property were tied together (cross collateralised), exposing them to huge risk with the bank, in either of the following scenario – equity extract for further investment or sale of one of the two properties. The bank holds power over equity in both scenario before Jason & Anna can have any access to the equity or gained any benefit from their hard work.
Jason & Anna wanted to build an investment property portfolio so they can have options and for Anna to retire sooner so she can enjoy life with their future grandchildren. They have worked extremely hard over the years and didn’t have the freedom to indulge when the kids were growing up. They wanted their assets working for them and give them financial relief!
If they stayed where they were when they came to see us, it’s unlikely they could gain control of their home and existing investment property when it came to a future sale, let alone build an investment property portfolio.
They wanted an investment strategy set up correctly right from the start to help with implementing this step by step plan to accumulate additional investment properties overtime.
Proposed Solution with a Tailored Plan:
1. Restructure of their existing home and investment loans to reduce risk and extract equity
2. Maximise equity release from their home to fund 2 x investment property deposits
3. Maximise cash flow, tax benefits and flexibility to pay off the home quicker
4. Scenarios to purchase 1 x blue chip property or 2 x bread and butter properties
5. Mapped out actionable tailored strategy to purchase of 2 x investment properties
Results: Jason & Anna corrected the existing structures and are ready to purchase their second and third investment properties, in line with a plan tailored for Jason & Anna.
Home Equity Release: $229,000
Investment Property 1 & 2: 2 x Houses to be purchased in a high growth suburb
Purchase Price: 2 x $420,000 at 80% Loan to Value Ratio (LVR)
Funds Used Up: $205,000 approx.
Total Property Ownership including Home: $2.6 million
Growth Projection: If the properties owned grow by a conservative 5% per annum, Jason & Anna will be adding $130k to their wealth every year, compounding year on year. In 10 years, this will be more than $2.3 million in net assets. At the same time Jason & Anna’s property rental income will increase overtime.
Property doesn’t grow in a straight-line basis. Jason & Anna’s portfolio may grow more in one year and less in another.
What’s Next for Jason & Anna?
Property Twins team will continue monitoring the value of Jason & Anna’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’ tailored plan established upfront by the Property Twins to enable you to keep moving forward.
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