The real estate gods have been kind to investors in recent times, with record low interest rates and steadily increasing property values. This current climate lends itself to super-charging your investment portfolio, particularly if you already have equity in your primary home or other investments.
Using assets as a main leveraging tool for investment borrowing is a tried and tested practice. Generally speaking this is a solid approach to take, provided you are continuing to add good long-term performers to your investment portfolio.
It therefore makes sense to build as much as equity as you can in your existing portfolio. Everyone starts somewhere, but you’d be amazed at how quickly a single family home can lead to an impressive portfolio of diverse real estate investments. Your borrow-able equity will be determined by several tests: your chosen bank’s valuation of your property, their subsequent criteria on lending, and how much you can comfortably afford to borrow, and then repay.
It’s difficult to control your bank’s lending criteria and your borrowing capacity, beyond minimising ‘bad’ debts such as credit cards and personal loans which is a must for any savvy investor. However, one aspect of the equity process you do have some control over is the valuation of your home. Keep a keen eye on the local market to ensure you have an idea of what similar properties are selling for. If a house on your street or nearby with comparable features sells for $570,000 and the trend in your area seems to be around this price point, you can be fairly confident your property will have a valuation of at least the mid-$500,000’s. Be savvy with requesting a bank valuation at a time when the market is steady or increasing.
Think carefully about the type of property you would like to purchase. So you can continue to grow your portfolio and build wealth into the future, look at investments that are easily comparable in established areas with good rental returns. A unique property does have benefits, like the possibility of scarcity on the general market and a good return upon selling. However, these properties may return more conservative valuations from banks given their unique status and a lack of comparable sales data.
Finally, consider planning ahead with a mortgage broker so you can have a good idea of which banks will suit your borrowing strategy. Borrow carefully, and consider the impact of future changes on interest rates. Investing is a long-term game that can prove very rewarding with considered purchases and lots of planning with the help of property and finance experts.
Brisbane’s property market is enjoying steady growth, and compared to interstate capitals is still relatively affordable. Recently experts have pointed at potential growth in Camp Hill, which is tipped to achieve at least 5% growth in the coming 12 months. Camp Hill offers a plenty of quality homes in a variety of architectural styles, many of which can be snapped up for under $700,000. Camp Hill and the surrounding suburbs offer proximity to the CBD, good public transport and excellent amenities: three key features any solid investment should demonstrate.
This is just one area of Brisbane with lots of potential; the market in the wider South East Queensland area offers lots of similar pockets with a strong rental demand and potential for further growth. Investing in property is a very rewarding way to secure your future and live your financial dreams, particularly in today’s market.