Buying your first home shouldn’t limit your vision as to what’s possible for you.
Most people have the mindset that they will do the home purchase and then think of investing later on. Translate this into the dread of paying off the home for 30 years (or as quickly as you can) and then think about investing. It’s not their fault. It’s what the society leads us to believe.
Not for our clients Olivia and Ashley. They knew they were buying their home (yay for Stamp Duty waivers!) and yet saving up to expand with their first investment property in due course. That’s what we call a two pronged approach….
About Olivia & Ashley: Defacto couple in their early and late 30’s. Olivia is an Accountant and Ashley works in customer service. Their family income is $157,000.
Where they were and what they wanted to achieve:
Olivia & Ashley were in process of buying their first home. However they are clear on their goals to build an investment property portfolio, so they can build a secure financial future.
The biggest challenge for Olivia & Ashley was not knowing what was truly possible for them with property. How they should really set it up so they can continue expanding on to the next purchase once their home purchase was done.
They wanted help with implementing the step by step plan to not only purchase their first home but also accumulate investment properties with the right structures over the long term. They were forward thinking about heir goals.
Proposed Solution with a Tailored Plan:
- Complete home purchase (with Lenders Mortgage Insurance waivers due to certain income and profession)
- Olivia & Ashley to continue building up further savings
- Selection of the lender to allow them flexibility to apply the “debt recycle” strategy
- Restructure of the existing loan and tax effective use of cash savings
- Maximise cash flow, tax benefits and flexibility to pay off the home quicker
- Tailored strategy to purchase of their first investment property properties with maximised tax deductibility
Results: Olivia & Ashley are set to purchasing their next investment property
Savings & Other Liquid Assets Available: $115,000
Funds used for home purchase: $65,000
Funds Remaining: $50,000
Investment Property (IP) 1:
Purchase Price IP1: $400,000 at 90% Loan to Value Ratio (LVR)
(No Lenders Mortgage Insurance Payable due to Olivia’s profession & minimum income requirements)
Funds Required for IP1 $58,000 approx. ($8,000 additional savings required plus some additional buffers saved up for emergencies and personal spend)
Total Property Ownership including Home: $1.035 million approx.
Olivia & Ashley are good to go for their next purchase, given they are great savers and are able to therefore realise their dream of kicking off their investment property portfolio.
By the way, their existing debt is set up in such a way, they will with the help of the Property Twins team be able to change their home debt into tax deductible debt for the $58,000 required for their next purchase. This is where the debt recycle strategy will help them.
Growth Projection: If the properties owned grow by a conservative 5% per annum, Olivia & Ashley will be adding $51k to their wealth every year, compounding year on year. In 10 years, this will be more than $650,000 in net worth.
Not forgetting in between their first investment property purchase and the 10 year mark, they will most likely be adding further investment properties to their portfolio, which will allow them to enjoy a greater net worth than just $650,000
Property doesn’t grow in a straight-line basis. Olivia & Ashley’s property holdings may grow more in one year and less in another.
What’s Next for Olivia & Ashley?
Property Twins team will continue monitoring the value of Olivia & Ashley’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.
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