Using your equity

You’ve made the decision to buy an investment property and you know the rental market will work in your favour.

You are keen to use the equity in your current property to buy an investment as part of your retirement plan.  But how much equity should you have and what are the potential pitfalls in jumping in too quickly or without enough knowledge?

The first rule is to keep borrowings less than 80% against an asset.

Anything more than 80% creates more risk for the lender and more for you. Cash flow is the prime consideration when you are buying an investment and knowing all of the variables that can have a negative effect on your investment. We can lay everything out with you and help you to understand whether the time is right to buy right now.

Many people think if the rental income is more than the mortgage repayments then it is a no brainer. But what about the costs – the clip taken by the property manager each month from the rent, the rates, the broken hot water service, the flooded bath that damages the flooring, the body corporate and elevator fees in an apartment complex, the upkeep of the communal swimming pool and gym?

Knowing what these costs are and adding them to the mortgage payments each month will help determine if you are going to be in negative cash flow and if you can afford the extra each month.

It’s also wise to consider the variables – what of the current second income or weekend side hustle disappears, or the tenants leave and new tenants are hard to find for a few months, there is a change at work and you are forced to take a redundancy, or you are laid off. We can help you devise a plan, a buffer, a ‘sleep at night’ account so you can manage the repayments when circumstances change.

“Our advisors can help you look at best- and worst-case scenarios and evaluate your current or future cash flow so you are not forced to sell the property under duress because your situation changes.  You don’t want to be forced into a position where you take the first offer, rather than the best offer, just because you have to.”

It is rare to borrow 100% of a property’s value without taking all of the actual and potential costs and comparing them to actual or potential income capacity of the property.  We can guide you through this and help you make a plan round the right time to invest 

It doesn’t matter in the short term what the property market is doing – as long as your cash flow is managed, you are okay.  As long as you know you have a buffer set aside for an emergency, you can manage the repayments with your current cash flow – you don’t make or lose anything until you sell. 

We strongly recommend you seek out financial advice from a trusted and qualified financial professional who will be able to devise an investment strategy tailored to your unique needs so that you can feel confident about buying an investment property using the equity in your current property.

Success Stories

  • Photo of Sam Rowe Professional Australian Rules Footballer, Carlton Football Club

    I was lucky enough to meet Matt Hale at a club function. I decided to go in to meet the team and it just felt like a perfect fit. Read Sam's full story

  • Photo of Kane Baker & Rebekah Elmaloglou

    We knew we wanted to put our money to good use, but we didn’t know too much about how to get started, so we sought help from the team at Rising Tide Financial Services. Read Kane's full story

  • Photo of Ben O’Neill

    I’ve learned so much from working with the team at Rising Tide. They helped me to understand and organise my finances, helped me to put a strategy in place to work towards buying my first home. Read Ben's full story

  • Photo of Tim & Vesa

    Friends of ours had recommended that we get in touch with Rising Tide Financial Services...Little did we know, it would turn out to be one of the best decisions we’ve ever made! Read Tim's full story

  • Photo of Anthony De Leo Sales Manager, Audio Visual Revolution Pty Ltd

    Having income protection, it’s obviously important in case things go wrong, you’ve got some back up. Read Anthony's full story

  • Photo of Alistair Tubb

    We’ve managed to get into a home that would allow us to grow which is great. They tied it all in together and it made sense to have a one-stop-shop. Read Alistair's full story

  • Photo of Fenella Wagener PR and Media Manager, Universal Music

    They helped us work out what are our expenses, and how much money can we save a month, and it’s crazy to think how much you can be saving a month! Read Fenella's full story

  • Photo of Trish Curtis Self-employed bookkeeper

    Right from the outset, Ali was so easy to work with. There just wasn’t the pressure I had experienced when working with other advisers. Read Trish's full story

  • Photo of Peta Currie Single parent

    While it’s fantastic to receive the income, I know that all of the paperwork can be really challenging for some people, and Matt has been a fantastic help. Read Peta's full story

More Success Stories

Testimonials

  • Since catching up with Matt, Tom & the team at Rising Tide, both Emily & I feel like we’ve had a chance to get our financial lives in order.

  • Great team! Braden was especially helpful in getting my finances sorted for my business.

  • Highly recommend the Rising Tide team - friendly, honest guys who have helped me make my financial dreams come to life. Also, they have a bar in their office, which is, you know, great.

  • Felt 100% care and commitment to my needs. Always highly responsive to requests for information and support. A+

More Testimonials

Footer