How use Equity to Buy Investment Property (Why some get it wrong) | Real Estate Investing Australia
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- เผยแพร่เมื่อ 2 ต.ค. 2024
- Equity mate!
This was the line from a series of successful ads from one of our major lenders a few years ago.
(Yes, I know. I’m showing my age here)
Anyway, their motivation was for you to increase the debt on your house to buy a new car or boat or anything that would fall in value.
Not necessarily the smartest thing to do.
However, there is a very smart thing you can do with the equity in your house…
And that’s to use it to buy investment property.
How do you do it?
Well, that’s exactly what I cover in this week’s video
In particular you’ll discover…
*** What most people get wrong about equity. (Warning! It can lead to massive disappointment)
*** When it’s ok to increase the debt on your home (Hint: It can give you massive financial security… if you do this)
*** How to build a property portfolio, without ever using your own savings (The power of tax free money)
Many people have the potential to use their home equity to create a strong property portfolio and enjoy the financial security that can come with that. They just don’t know it’s possible and hence miss out on the opportunity.
Could that be you? Check out this week’s video to find out
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Looking for a blueprint on how to build passive income through property, especially when interest rates are rising?
Then get a copy of my book free (the digital and audio versions) here 👇
www.nirobook.c...
Financial disclaimer: I am not your financial advisor and the opinions I share in this video are purely my opinions. This is not to be considered personal advice as it is general in nature.
best video on TH-cam explaining equity in Australia. Other just sell the positives and dont touch on the risks or the realities of what comes with taking out equity
great video , what about turning principal place of residence (ppor) into an investment property ?
Watch out - I’ve been on the planet longer than this fella- let me give you a glimpse of what can happen!
1992 - I converted a property £52 k into 4 flats ( apartments) they were valued at 70-75 k each on completion-
Crash came- bank forced the return of loan ( I started at 30 percent ltv ) - I saw one of my almost completed flats sold in auction for £22,000. The rest sold later that year. Today 350,000 might get you in the door of this type of accommodation. 25 mins from Liverpool Street station in London. I’ll give you one piece of advice- your bank/ building society is way way worse than a loan shark- or just a shark. They couldn’t care less if they were watching you drown whilst circling in a life boat. It’s all about what they want at the time - you are of NO consequence. You’re safer down at the casino! At least when you lose the pain is quick. Please be warned and don’t believe the internet is your friend and guiding hand- it’s not. Be careful out there.
Great explanations! Keep up the quality, this is really detailed and thorough
Thank you for your explanations🎉
Something major that is missing in this is;
1) serviceability of loans in those properties - would rent cover the instalments - if it doesn’t, then you’re negative geared and banks frown upon it
2) projected rental from purchases.
This should be explored more
LMI video please. Thanks for the great videos
Coming soon, thank you
Another great video. Thanks Niro!
Thanks Steve
Only a good strategy to have high equity value if your first ppor is sitting on.equity of 200 k. How does that happen in the current cycle- for example you need a high borrowing capdoty but im on 1 wage and have 120 k in my current home- so what wuld be a good ip investment? For example my current ppor is 600 k value ( 480 k loan ) so 120 value- 80% can only get 90 k extractions and i can only get a 350 to 400 k IP which ks impossible in perth given its growth- otherwise i need to pay lmi
You allo need 6 to 8 percent yield and positive cash flow
I would be more interested in how we can save more in CGT tax, as basically people say we will only pay 0% tax unlike normal investment.
Hello sir I like this kind videos. Please can you opinion on this please. I have lots of equities for my properties have houses in Perth and Darwin with LVR is only 40% for everything. We have approved to draw only $300000 cash out but we did on interest only. Please sir is there benefit for access cash out on province + interest or interest only? What is your kind thoughts please. Do you do principle or the interest only when you do this. Thank you sir. So kind.
Congratulations on your investment success. I can't really advise on what you're asking for because it depends on your goals, your borrowing capacity and other matters. However, a good mortgage broker should be able to assist you here.
@@InvestmentRiseTV Hello sir thank you for kind words and replying. It feels like famous person replying thank you sir. I only take out $300000 because we do not have to use all equities. We are thinking to purchase commercial property but maybe we are thinking to do residential. We have already loan approval on interest only but I just please ask as simple question
What have you done in the past? Have you always do principle + interest or have you tried interest only for equity loan. We make decisions for ourself but I like to hear your opinion what you have like to do.
Thank you kind sir Niro ji
This is a very great and detailed explanation, however, the unclear part for me is how do you take out the equity? do you refinance? apply another loan to another bank?
Enjoyed watching that. Easy to understand and follow.
So essentially you will keep IPs as Interest Only ? And for how long ?
5 years Max. But then you can refinance with another bank to do interest only again.
Great video, by far the most informative on youtube. Keep it up!
Thank you. I appreciate it!
Heya sir, thanks heaps for this super informative, really wanted to get some advice regarding if we should go with the LMI, based on 80% of our house value think we may only be around 10% deposit however wed be well demonstrating to service another being 220-230k household income
Very detailed informative one, thankyou
Good video
But still confused
So the 140k used, will increase repayments on my home loan?
And how can the 140k be invested only
HI Niro, very nice and informative video. Can you please do a video on SMSF please
Thanks for your feedback. What would you like to know about SMSF?
So the game changes completely if I have 100% equity in my home... I have 100% equity on all my properties. My home, three apartments, and some parcels of land. I need to get some use out of that equity! I'm retired, so I've been extremely risk averse and have made sure to pay off my properties as soon as possible.
LMI please
But don't other lenders that look at your downpayment see it is leveraged and see it as a risk refusing you a loan for property number 2&3?
If I use the equity in my home to buy an IP, then is that now a cross collateralisation loan?
Steve, that depends on how it is structured. I'll do a future episode on this
@@InvestmentRiseTV I would really appreciate it as I'm wanting to buy a IP using equity but I don't want to cross collateralise.
@@LOPANindustries Happy to help
Could you please advise who's name you put investment properties in?
Can you please advise what all are the tax advantages for IP. Thankyou
12:00 minutes mark, purchase multiple investments properties.
That’s because the house is never the collateral, your income is!
LMI
Do you have to have the income to cover both loans or just your primary home loan?
u got it all wrong, go back to classroom again. Have you factored borrowing power with 6% interest rate? in your example the total loan is 1500k, wow calculate the monthly repayment
This video was published a year ago. The concepts still apply but, you're right, the rates are different. I might need to do a new one for 2023. Thanks for the idea.
Does taking equity on your home, increase the home repayments on your existing mortgage. Thank you 😊
Hi mate the episode was great. But it would have been great if you have given some insight about the borrowing capacity and linked it with releasing equity. As you know many individuals has a property with lots of equity. However they don’t have the borrowing capacity. If you have time please clarify this through an illustrative video mentioning what are the ratios banks use to assess the borrowing capacity. Thanks
Daney, thank you.
Hello Niro,
Nice video. I was thinking about grading you, but then thought the better of it. Solid information as always. And you worked in the white board- EXCELLENT! However, your presentation style needs a little work--in brief: I am thinking your typical investor is a bespectacled forty-something, and may have poor eyesight- you gotta write bigger, use a more visible ink and do a little something about that lighting, which is bright, but causes glare in contrast with the white board (you gotta up your game here, man, as this is quite possibly costing you worthwhile clients, and I want to see an excellent investment advisor like you succeed).
Overall, yet another great video, packed with good, solid information. You are definitely not steering newbies to the RE investment space wrong, and continuously prove yourself to be a great resource. Your video talks about the phenomenon known to us in The (Former) Colonies as "Equity-Hopping" (using the accumulated equity in one property to get into==that is, hop into--one or more subsequent properties, repeating the process ad infinitum for as long as possible), and you would do well to perhaps show the reader the risks--namely, the downsides--associated with it and just how it turned out for us in the states during the Great Recession and for Aussies when RE prices pulled back a few years ago...
In closing, here are a few tips to up your game, Guy:
1. You might want to consider breaking this video up into parts--same video, but with several chapters.
2. Even better, you break this video up into several videos, creating a series with each focusing on a particular piece of information from this video, but with more detail. Here is just one idea in that vein:
a. The topic of owner's perceived equity- you know, like you said, the classic mistake of newbie RE investors (that is, viewing equity as the difference between owner's estimate of property market value and the mortgage on said property); you could have soooooo much fun with this one topic alone, as there is a lot to unpack here (for example, how owner's perceived equity is shaped by various croupiers--RE agents, auctioneers and property listing sites on the internet--during a rising market and their various agendas, the difference between harvesting equity (and what you might actually get during a sale) and borrowing against the equity in the property, and always forgotten dimension of accounting for all liabilities against a property when looking at equity calculations.
b. The mutually reinforcing importance of available equity and release-able equity, and why it is more important to be conservative and focus on the latter than the former.
c. How to equity-hop without going bust/bankrupt.
d. Asset-ratios, Leverage (Debt)-ratios and Income-ratios: which is the most important, and why
e. Capital- both its requirements in RE and its allocation and why it is critically important for success
f. Personal financial position- everything from net worth excluding one's abode to stability of earned income sources apart from rental income sources and the crucial difference between income statements, revenue rolls and cash flows.
3. As you have probably guessed, I am a huge fan of white boards. You gotta have two of those in the background, both side by side--one on the left and one on the right. Use the one on the left to provide an outline of the topics of the video, and use the one on the right for your example sketch work. Or you could go high tech and have a fifty- or sixty-inch high-res screen that you can use like a canvas to write and sketch on. And write BIG! And ease up on the lighting (not too much, though--we still gotta see your masterpiece!) so that there is no glare and we can see your intelligent insight hard at work.
Hit me up if you want to discuss more in-depth. And don't be afraid to offer a recommendation to noobs as to whether to be aggressive with equity-hopping or be conservative (I personally hope that you come down on the side of conservatism). And please continue to post very intelligent and insightful videos. Keep up the excellent work, Niro!
Cheers!
Thanks Gregory. I appreciate you taking the time to offer these suggestions
Wow, how good of u to take the time. Thanks for the tips of what else i should research
LMI video please! Would be really helpful
LMI episode please
Thanks
Very good information
LMI yes or not.
Tia
Could you use overseas Property you have inherited?
You should check with your bank on this one
LMI episode please
How would the cross security look like amongst these investments ?
Rose, cross security is not something I'd normally recommend. What makes you ask?
@@InvestmentRiseTV because when I refinanced my PPOR, the bank took it as a security
@@rosegogolin6185 Oh I see. I might need to do a video on this to explain the positives and negatives. Would that be of interest?
It would be. Although if I had a choice I would not want them cross securitised against each other. But since banks are intent on protecting their interest, I did not have a choice. Or do I?
Informative video BTW. Thanks for sharing
thanks, Niro
Interesting
Lmi episode
LMI
590000
Nice!
LMI
Hands down, this is amazing. Thanks for the clear explanation and transparency.
My pleasure. Thank you for the kind feedback Raki 👍
What costs are involved in holding each property like land tax,council rates bodycorp, water rates insurance costs, maintenance and ect,ect...
👍🏻
Brilliant video👏🏻👏🏻
Thank you! 😀
LMI episode pls
Ok, thanks
Lmi please
Thanks Lucy
LMI 👍
Thanks
Hi Niro and investment rise, I love your videos and your strategies, my question is how much do I need to be making on my job to be able to refurbish the 2 new investment properties
Pk
Pk, I'm afraid I can't answer that for you as I don't have enough information. However, a good finance broker should be able to assist
@@InvestmentRiseTV do you know a good broker that can assist me ? I live in Melbourne
Hi Nero, I just want to say a big thank you for this vedio. This vedio was something I was waiting for. You have explained very clearly with example in simplest form. Thank you.
Thanks Vinnish
Great video. Thanks. Session on LMI Please. Also, Interest Only vs P+I please 🙏
Will do. Thanks for your feedback
Hey mate, Session on LMI plz - whether to go with 80% , 90% wiser
Do you feel comfortable you will return more in CG and rent that the cost of LMI over the period it would take to save the amount required to avoid or reduce LMI
Thanks mate
Ann, great point. Thank you