A mate of mine called this week wanting to know how he could use his equity to buy an investment property and whether I thought that was a good idea. He purchased his property about 15 years ago and he has done a cosmetic renovation. With the surge in prices since Covid he is keen to understand how he can use this new value to his benefit. He paid about $300,000 and spend about $300,000 on the renovation. Looking at sales in the area I think its worth about $1,500,000.
Which means he now has about $900,000 in equity. I think he thought he could just use that money like cash and off-set the equity against a new property. Meaning he could just go and buy a property for $900,000 and have no repayments. Unfortunately that’s not the case. A bank will let you use 80 per cent of the equity, so in this case $720,000, as security against another property. Trying to keep him awake, while explaining to him my bush accountant version of property investment, I decided to start talking about the money.
I told him that most likely the rent would pay for most of the property and his real return will come from the value of the home increasing in price. He asked “So do people live off the rent as income?”. I told him that’s unlikely from one property. Once the debt is paid down, you can make some money, but the real cash comes from the property increasing in value and you selling it or starting this cycle again.
While pale blonde timbers like Tasmanian Oak have dominated Queensland interiors for years, a richer, more sophisticated finish is making waves in luxury Brisbane property: dark walnut, smoked oak, and deep stained timber. Here is how dark wood accents add a layer of boutique-hotel elegance that grabs buyers’ attention. 1. Creating High-Contrast Impact In light, … […]
As the expression goes, how do you know if someone has run a marathon? Don’t worry, they’ll tell you! With that now noted, I feel compelled to inform you that I have run a marathon and I feel much better for having shared that with you. That said, this property market feels a lot like … […]