How to use equity to invest in property right now
Over the past few weeks, enquiries from Sydney-based homeowners have been coming into our office thick and fast.
Many of these people are what we often call “mum and dad” investors, which means people in their 30s or 40s with or without children who are keen to buy their first investment property.
What’s interesting about the timing of these enquiries is, of course, the fact that the economic uncertainty from coronavirus is still in play.
However, these potential investors are economically savvy and recognise there is currently an opportunity to buy well given the dearth of other buyers.
Many of these potential investors work in professional services and have been mostly financially unaffected over the past few months.
On top of that, they have benefited from the sharp uplift in Sydney property prices over the past five years as well as record low interest rates.
This means that they often have paid off their home or have equity in the hundreds of thousands of dollars.
Strategic property investment
They have been reaching out to us because they also understand that strategic property investment requires expert advice as well as top-level research.
While they have ridden the upswing of the Sydney property market, they also recognise that the Harbour City’s market is likely to experience softer market conditions over the short-term.
This fallow market patch was probably already on the cards at the start of the year, given affordability considerations as well as the usual mechanisms of market cycles.
However, the banning of international visitors as well as migrants for the foreseeable future is likely to also be a drag on property prices in the months, and possibly years, ahead.
They understand that real estate has always been a safe haven in times of economic turmoil, including this one.
So, rather than waiting and watching to see what happens next, they have decided to put a strategic portfolio plan together and invest in property as soon as possible.
The power of equity
As part of our service offering to new clients, we provide detailed data analysis on the locations, often interstate, that are poised to outperform in the future.
Of course, one of the major advantages that these potential investors have is the equity they have in their Sydney homes.
Often, they have $500,000+ in equity at their disposal, which they can leverage into one, two or even three investment properties in high performing growth locations.
For example, we have been active in markets outside of Sydney for a while now.
During our portfolio planning and tailored investment strategy sessions, clients are often very surprised at the bang they can get for their buck in interstate markets like Brisbane, Adelaide, Regional Victoria and Regional NSW.
Often they can’t quite believe that the median house price there is about half the price of Sydney (in some cases even more).
This price disparity means they could potentially buy two or three median-priced investment houses there using the equity they currently have in their homes.
As well as being more affordable, gross rental yields are usually much higher in interstate markets, too. And, in the select suburbs we have approved for investing the capital growth upside is significant.
All of these factors are why we’re helping more and more Sydneysiders invest in property right now, which will ultimately be a decision that is set to change their financial futures – and their children’s as well.
A great example of this is a new client that came onboard only two weeks ago who was astounded when they realised they can invest in three strategically located properties in the next 6-9 months that will deliver a positive cash flow position of $9,350 per annum across the portfolio. In this particular case the client is ahead on cash flow and reaping the benefits of capital growth.
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