Can You Utilize Your Equity to Purchase Property? Understanding the Truth Group

Absolutely, leveraging your equity to invest in properties is indeed possible, and it’s a strategy I’m actively employing with clients to build robust property portfolios. Let me illustrate with an example without disclosing personal details.

Consider a property valued at $800k with an outstanding mortgage of $400k. In this scenario, you possess $400k in equity. The pivotal question is: how much of this equity can you access?

In essence, you can typically access up to 80% of your equity, contingent on the Loan to Value Ratio (LVR). Understanding your LVR is paramount as it dictates your borrowing capacity and subsequently, your ability to expand your property portfolio.

Let’s dissect the numbers. With $400k equity, 80% translates to $320k of available funds. This amount can be utilized to invest in additional properties without incurring lenders mortgage insurance (LMI).

Simplified, your LVR calculation involves deducting 10% from your equity twice, leaving you with 80% of the initial amount, in this case, $320k.

With $320k at your disposal, you can seize opportunities to acquire more properties, typically with 10% deposits. For instance, if you invest in a $600k property, factoring in expenses like stamp duty and legal fees, you’d require approximately $80k. Thus, with $320k, you could potentially acquire four more properties, provided each adheres to prudent investment criteria.

Subsequently, as your portfolio matures, your equity grows. Suppose your initial property appreciates to $1.4 million over seven years, adding $600k to your equity. Leveraging this newfound equity, you can further expand your portfolio, subject to lenders’ criteria.

However, it’s crucial to note that lenders may withhold equity if the properties you intend to acquire offer subpar rental returns. That’s where the expertise of Truth Group comes into play. Avoid investing in properties with rental yields below 5%, as it could impede your ability to expand your portfolio significantly.

The key lies in strategically investing in properties with high rental yields in growth-oriented locales with low vacancy rates. This approach not only enhances your borrowing capacity but also mitigates risks associated with financing.

To execute this strategy effectively, your finances must be in order, demonstrating a stable income. Maintaining a rental yield between 5.5% to 7% is optimal, ensuring seamless access to financing.

If you’re eager to embark on your property investment journey, I invite you to schedule a complimentary discovery meeting. Together, we can chart a course towards building a resilient property portfolio.

I trust this message has provided valuable insights into leveraging your equity and understanding the nuances of LVR. Have a fantastic day ahead!

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