Savvy investors should look to recycle their equity as quickly as possible. Once the property experiences growth, a valuation should be prepared by your bank in order to determine your overall equity. This process can be repeated as often as annually.

How to use your lazy equity

Below is a simple visual representation of how you can turn your equity into something substantial. The key is to duplicate this process in order to build a larger, more sophisticated property portfolio.

Source: Property Buyer, 2016, http://www.propertybuyer.com.au/

How much do properties grow in value?

This is never an easy question to answer. The below figures detailing Sydney’s median house prices over the past four decades go some of the way to answering this question.

1980 – $68,800
1990 – $194,000
2000 – $287,000
2009 – $547,000
2016 – $1,050,000

There’s a clear pattern in how properties have grown each decade, with the most recent median prices growing exponentially.

With the right advice and financial structure, you can use your lazy equity to continuously grow your portfolio.

What now?

If you’re keen to grow your portfolio, follow these steps:

1. Revalue your property: first things first, make sure you get your property valued. It will give you true transparency on what your financial situation is before you make any decisions.
2. Recycle your equity: do this after making considered, educated decisions. Ensure you seek the help of professionals to assist with your choices. A mortgage broker and financial advisor are a great place to start.
3. Get the equity moving: engage with property professionals to seek out a great investment purchase which is capable of providing you with high capital growth and strong rental yield.

To get your equity to work for you, contact CPS Property today to discuss your investment options.

The difference is usually in the timing.

I’m not talking about timing of the market where you buy at the bottom and sell at the top, (as if you can ever accurately pick those times anyway). No, I’m talking about you and the time you are right to move from investing to speculating.

You see, there is a significant difference between investing and speculating and to understand what I mean by that I think it’s instructive to look at the definition of each one.

According to Investopedia.com

“Speculation is the act of trading in an asset or conducting a short term financial transaction that has a significant risk of losing most or all of the initial outlay with the expectation of a substantial gain.”

While investing is defined as;

“Investing is the act of committing money or capital to a long term endeavour such as real estate with the expectation of obtaining an additional income or profit.”

One method has high risk attached to it and the other is a measured, long term approach to making money. Each method can make you money, no question about it. Looking at it another way we can say that your risk level will decide which way you will invest.

Searching for big profits quickly falls into the speculative camp while investing for the long term falls into the investor category. Again, both types can make money but the risk of losing it goes up with the level of speculation involved.

At CPS Property we want all of our clients to be better off after they have seen us. For most people this means that they are either new to investing or need more education in the fundamentals of property investing.

To fulfil this need we created our CPS Methodology and Asset allocation which is used to identify potential growth suburbs and to select the right property at the right price in the right location.

A long term investor will work their way towards a property portfolio using the same basic fundamentals each time. This type of methodology provides consistent results over the long term and is symptomatic of a systematic approach to successful investing.

By applying the key criteria we identified suburbs that our competitors weren’t recommending which made us pioneers if you like. Not everybody agreed with our selections but the interpretation of the data was very clear.

Even today, I still remember a potential client handing back a contract for a 1 bedroom Studio in Surry Hills priced at $420k because they thought there wouldn’t be any growth in that area after the GFC – I should mention that the same property is now selling in Surry Hills is $750K, just on 5 years later.

Naturally, we have identified other suburbs with similar results so we have no problem applying the CPS Methodology to locate new opportunities.

It’s worth pointing out that the CPS methodology cannot be used to identify opportunities for speculators. It utilizes data that can be interpreted for long term investment, reducing the risk to our clients. It’s a serious long term solution to investing in property.

Another difference between the two investor types is an Investor can benefit from the advice of a Financial Planner. Long term low risk investments fit nicely into a Financial Plan. After all, a Financial Plan is looking to get the result you are looking for, over a given time frame, and in line with your risk profile. It would be difficult, to say the least, to design a Plan that incorporates high risk, short term investments and still be confident of success.

The fundamentals we apply for our clients are designed to provide an acceptable level of risk in conjunction with an achievable Plan using a property that fits our methodology.

We also like to educate investors on how they can improve by reviewing their current property portfolio and borrowing position. Listening to the noise in the media and avoiding educating yourself is a sure way to create confusion.

Given that this is the message we have been preaching since 2005 there is little reason to change a successful formula.

Jacob O’Neill

Principal.   

If there is one thing for sure, it is that high-end renters want an apartment that stands out from the norm on a grand scale, the following are some features that will accentuate and affirm these expectations of yours.

Luxury Features

There is no doubt that some of the best benefits that come from purchasing or renting a high-end apartment are not even in your living space. You should expect no less than several facilities such as a working gym with views of the surrounding city, pool area, accessible storage, and outdoor areas such as open rooftops.

Exceptional living space

This includes everything from simple kitchen appliances to the materials used for bench tops.

Views overlooking the city or your surroundings are expected and should be one of your main focuses if you value it. Fortunately, this is always a given if you are renting on a top floor.

In addition to the views, your apartment should always be provided with enough sufficient light during the day that you don’t need to use any of the electronics, as well as an abundant amount of space to move around.

Important factors to remember are simple things such an efficient sound system, congruent colors, working appliances, and quality materials used on your furniture, which should be marble, stone, or something of similar value.

Location

Although the buyer chooses the location, you should expect any high-end apartment to be positioned in a place that is central to many high importance venues and areas. This means that areas such as shopping centers, parks, gymnasiums, public transport, and doctors should all be within walking distance.

Of course, you can’t expect everything you want to be perfectly positioned around your building, but there should be an expectation for high-end apartments to have these luxuries more than anything else, all you need after that is some personal research to find the optimal one.

Consistency

It is true that the main attraction and expectation is to have a quality living space, but if the rest of the building does not meet these standards, then it is truly not a high-end apartment. You should expect everything from the lobby to the halls to depict what the apartment standard is.

A good way to test the above is when entering the building for the first time, are you surprised when looking at your potential living space due to the incongruence with the rest of the building? The answer will tell you a lot. Consistency means that everywhere you go in the building whether it be where you live, swim or train, are all depicting high-end quality.

It is always natural to have expectations when buying a new place, especially when putting labels such as high-end on it, which is why it is integral always to do your research and seek knowledge from professionals.

No matter what stage of life you’re at, consider yourself early to start compounding property in comparison to if you start a decade from now. After reading this article, hopefully, you quit procrastination and get going to secure your financial future.

Just what is compounding

Imagine visiting the snowy mountains and sitting on top of a snow hill, create a small snowball and roll it down, see what happens. Walk to the bottom of the hill and look at the result, you will find that depending on how long it was rolling, its size has increased dramatically.

This is just like compound growth except in a different context. Compounding is interest on interest, therefore reinvesting your gained interest every single year and watching it grow exponentially on a long-term basis.

Why you should start now

Compounding is a patience game, and although it is evident that the younger you are the better, there is still no better time to start than right now.

A common excuse that most people make on this subject is “I don’t have enough money,” the truth is, starting earlier is usually a lot more important as opposed how much you invest. No matter how wealthy or poor you are, start.

Compounding and property

Compounding over time is powerful when combining this with property investment in the right conditions, it is like adding jet fuel to the engine.

Although the concept is the same, you can leverage the bank’s money while utilizing the services of the taxman if conditions are right and the property market is booming or going relatively upright; the potential to make a lot of dollars is exponential.

Risk Factor

The risk in property compound growth is higher than the standard, and although it is real, it is over dramatized in the individual’s mind which blows it out of proportion.

The fact is, there is never going to be a time where there is no risk in investing as the interest rates and other factors are always going to be fluctuating.

This is all the better reason for you to focus your mental resources on finding the most suitable property that has the potential for the most reward and least risk, and optimally, to find a professional to help you.

If you are someone with a risk associated mentality, or simply just want professional assistance, be sure to visit

https://www.cpsproperty.com.au/contact-us/

Unfortunately, these feelings can cloud our judgment; the following are crucial considerations that you must make before purchasing a house and land package.

Inflation

Ensure that before any major decision, you do your research and find out how much the properties are worth, this includes confirming that the property is not being purchased for more than the market is willing to pay for it.

It isn’t uncommon for the estate owner to inflate the buying price or add more structures to raise it, this could mean that the decision to purchase the land independently and gaining quotes from professional could be the better option.

Fixed prices aren’t always so fixed

This is where your original budget could, in fact, be wrong due to unforeseen circumstances. Numerous cases result in the buyer purchasing the property and having it built for a fixed number, only to find additional add-on costs due to the property sloping and ongoing building issues, as well as upgrades.

Therefore, it is integral to make sure that your budget is always a little higher than your willing to spend, it is always optimal to have breathing space.

Blue Chip Areas

Ideally, you want to aim for the high quality and premium locations, and never settle for a lesser estate.

The best way to ensure this is only to be interested in areas where there is total congruence, which means landowners and developers are targeting owner-occupiers, and the positions are relatively premium and limited. Although this is a higher cost option, the high maintenance and care from the locals will make up for it.

Decide

Once enough research is completed, make your decision and act on it almost immediately as soon as the house and land package is released and has the lowest entry point price.

As the property stays on the market, the price will continually rise as the supply and demand are quite high, this creates an urgency in the buyer, and rightly so.

Never let the notion of constant price increase rush your research and judgment, but never dwindle with your time, make your conclusions and act on them while the prices are still low.

These are only a few but vital considerations to make when purchasing a home or land packages, have a look at https://www.cpsproperty.com.au/contact-us/ for more information.

What is ‘equity’?

Equity is the difference between your property’s market value and the amount owing on the mortgage. For example if your property is worth $500,000 and you owe $300,000, your equity value is $200,000. The key piece of information to remember here is equity is based on “market value”, which means if you’ve renovated your property since the purchase, or you haven’t had it valued in a couple of years, you could be sitting on a lot more equity than you realise.

How does it work?

When purchasing another property (with a decent amount of equity already under your belt), you can access 80 per cent of your equity as security with the bank, which automatically eliminates or reduces the need for a deposit on your next purchase. This is also known as “useable equity”.

As a general rule of thumb, according to NAB, to calculate how much you can borrow from the bank -multiply your useable equity by four. So in this case $200,000 x 4 = $800,000 borrowing capacity. However, this can vary based on several variables and will depend on your bank and unique financial status.

Can you use your home to buy an investment property?

Yes. How wonderful is that? Many homeowners are in a great position to use the equity from their owner occupied property to begin building their property portfolio. However it is important to remember to pay off your personal home loan as fast as possible as this isn’t tax deductible unlike interest on an investment property which is tax deductible.

What’s next?

Like any major financial purchase, it’s important to do your research and engage with a financial professional to assist you with your long-term strategies. Understand the scope for capital gains and impact on cash flow, and ensure you don’t over capitalise and therefore put unwanted stress on your hip pocket.

Contact CPS Finance today to discuss the property investment options available to you.

The amount of equity you have in your property is the difference between its market value and the amount of any mortgage finance secured against the property.

Read the full article on yourmortgage.com.au

Interested in investing using your equity? Contact us.

There are a number of factors to consider when working out how long it takes property prices to double, and the seven to 10 year rule isn’t accurate.

The big factors are those such as supply and demand, interest rates, employment, affordability and consumer confidence. Other factors such as population growth and council commitments to development can also have a strong impact on how long it take property prices to double.

The type of property and its surrounding amenities and infrastructure can affect the supply and demand factor for a particular property market.

The risk of believing these property investing myths and making decisions based on them is that they can affect your chances and ability to build and expand your property portfolio.

The good news is that property in Australia is growing in value exponentially, and for many investors they may be lucky enough to double the value of their investment in 7-10 years. However, this isn’t a sure thing. The important thing is to do your research and get advice to find the right place to invest with good capital growth potential. Contact us to find the right property investment for you.

On the back of this month’s RBA announcement the Australian lending landscape has entered uncharted territory with the official cash rate now sitting at 2%!

If you haven’t checked recently there are some fantastic opportunities available to restructure your finances, potentially saving you thousands in interest costs and most importantly set yourself up for the next investment opportunity.

Whatever the reason, now is the time to act!

Here’s how you can leverage the current low interest rate environment:

1) Get your property valued by the bank before they change their valuation policies

Property values are skyrocketing, especially in Sydney. Now is the best time to review your properties asset value and lock in a valuation at the top of the market before banks change their lending policies.

See article re pending policy change http://www.smh.com.au/business/banking-and-finance/banks-put-brakes-on-investor-lending-20150521-gh6imi?skin=dumb-phone

2) Our Finance Strategy – Extract your equity NOW, before the rules change

The higher the bank’s valuation on your property, the more equity you will have to reinvest in other investments.

We recommend extracting the equity from your property as cash and moving it into an offset account. What this will do is ensure that you have the capital ready for your next investment opportunity. If your loan is interest only, it won’t cost you anything to keep the money in your offset account.

The important thing is to maximise the amount of capital you have available for reinvestment. Ideally this amount should be 80% LVR (loan to valuation ratio) of the value of the property, as this will mean you can avoid paying Lenders Mortgage Insurance.

3) Look for the next investment opportunity

Now you are ready to invest in the next opportunity. Get advice from property professionals on which investments make the most sense for you and your personal circumstances.

Interested in reviewing your home or investment loan? Contact us for a second opinion.