With the study of case studies, other peoples experiences, you can start to model different strategies of building wealth though property.
But, your experience will be unique, every year market forces are unique, and every property is unique.
When you formulate your own operating system for building wealth through property you can handle the unque circumstance that will lay ahead.
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“How to build a massive property portfolio…your own property operating system”
Now to the case studies:
Australia’s top property investment experts unveil insider strategies for how to use investment property to pay off your home loan within 10 years. They reveal what, where, and how to buy to reap the rewards.
Owning your own home is something many of us aspire to, despite claims that homeownership is overrated. But let’s face it, most of us will carry our mortgage for at least 25 years before we can get rid of it.
Turns out you don’t have to. In this game plan, our experts lay out practical strategies for paying off your home loan sooner, using your investment property. They show you how to structure your finances, and what property to buy and when.
In this case study, Bob and Irene have an ambitious goal of paying off their mortgage in 10 years. They are currently paying $3,000 per month towards their mortgage, after refinancing.
Looking at it very simplistically, if they want to repay their mortgage in 10 years they need to increase their monthly repayments to $5,000 (assuming a 4.5% interest rate), which is an extra $2,000 per month. Obviously, this is not possible given the couple’s current circumstances.
They are wondering if they can somehow use the equity in their home to invest in an investment property with a view to helping them with their goal.
Many people think they need to fully repay their home loan before they can invest in property, so Bob and Irene’s line of thought is on the right track.
Their current financial profile will allow them to borrow $540,000 to invest in property.
We could boost their borrowing capacity to about $750,000 by converting their home loan to interest-only repayments, as some lenders are happy to take actual repayments towards servicing.
However, this would be increasing the financial risk for the family, and I would not recommend this approach.
Using equity to invest
There is about $100,000 of equity in their home that can be used to help them acquire a property and still keep the overall loan-to-value ratio (LVR) below 80%, which is a LVR that most banks are comfortable with.