Are you looking to expand your investment portfolio but find most of your wealth is tied up in your family home? You might be able to leverage the recent growth in the property market as equity for an investment property. Let’s explore how.
We all have a few financial goals, and currently, investing in a rental property is among the most popular in Australia.
In fact, according to MLC’s Financial Freedom report, more than one in five Australians (21%) aspire to own investment properties as a means to build their wealth. Interestingly, this aspiration increases to 27% for Gen Zs and 23% for Gen Ys.
Investors are increasingly drawn to property, with lending for investment properties rising by over 30% in the past year, based on data from the Australian Bureau of Statistics.
It’s easy to see why property investment is attractive. Over the past five years, rents have surged by 39.7%, rental vacancy rates are extremely low at just 1.3%, and home values across the country have increased by 13.5% since January 2023.
CoreLogic’s latest Pain and Gain report shows that property profits have reached a 14-year high, with homes resold in the first quarter of 2024 yielding a median profit of $265,000.
So, how can you tap into these recent property gains without selling your home?
Here’s an example: Imagine you purchased a $750,000 house five years ago. Due to recent property price increases, your home is now valued at $1 million. Let’s assume you originally took out a $600,000 loan, which you’ve since paid down to $500,000.
By refinancing your remaining $500,000 home loan balance into a $700,000 loan (which represents 70% of your property’s new market value), you could unlock $200,000 in equity. This equity can be used as a deposit for an investment property.
It’s important to note that banks typically allow you to borrow up to 80% of your property’s market value. So, if you refinanced to an $800,000 loan, you could unlock $300,000 in equity.
This strategy allows you to enjoy the benefits of becoming a property investor—including rental income, capital gains, and potential tax advantages—without necessarily tapping into your cash savings.
Even better, if your rental property increases in value, the growing equity in that property could be used to invest in additional properties.
There are various pathways to becoming a property investor. You might have the funds to make a cash deposit, or you may consider holding onto your current home and using it as a rental property after upgrading to your next home.
Alternatively, you may have other investment goals beyond the property market, such as using your home’s equity to invest in shares or boost your superannuation balance.
What’s crucial is understanding the options available for your specific situation.
Would you like to learn more? Call us today to discover how you can become a property investor in Queensland especially in Townsville, whether you’re considering opportunities in Brisbane or the Gold Coast. We’re here to assist with all your home loan, mortgage, and refinancing needs.
To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au.
Disclaimer: The content of this article is general and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your situation and may not be relevant to circumstances. Before taking any action, consider your particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent.
