It’s no secret that buying an investment property continues to be one of Australia’s favourite ways to invest. An investment property is often purchased with the goal of making money and it ultimately should help to increase your wealth and create a more secure financial future. However, if this is your first time thinking about an investment property, you might be wondering how you could afford one to begin with.
To purchase an investment property, many investors use the equity in their existing properties, which enables them to build an even bigger investment portfolio. By using existing equity to buy more properties, you can get into the market at today’s prices and reap the rewards of price growth, as opposed to waiting and saving up a deposit, which can take many years.
What is Equity?
In simple terms, equity is the ownership of assets that may have debts or other liabilities attached to them. It’s also one of the most powerful tools property investors have at their disposal because it allows them to build their property portfolio faster. Many investors use the equity in their current property to buy another investment property. That property will then hopefully grow in value, allowing the investor to buy another investment property, and so on.
Investing with Equity
Over time, if you keep using this approach and adding more properties to your investment portfolio, it will have a compounding effect: every time the property market rises, your property wealth and usable equity will rise too. Remember that property is a long-term investment and you should not rely on property prices rising straight away. The longer you can afford to commit to a property the better and as you build up equity you can then consider purchasing a second, third or fourth investment property.
The longer you hold onto a property, generally the better growth you will achieve. Many experts say to never sell and simply leverage the growth in your property into another property or other investment.
Where to Start?
Buying an investment property can be financially rewarding, allowing you to live a more comfortable lifestyle and retire earlier. If this is something you would like to explore, we highly recommend speaking to a financial advisor or appropriate professional who can better advise you. Then, once you have your finances sorted, you can start your search for your first investment property.
Disclaimer: No person should rely on the contents of this article without first obtaining advice from a qualified professional. This article is prepared based on general information only. It does not take into account individual financial objectives or needs and is not financial product advice.