A lesser-known strategy to get started as a property investor

More than 2 million Australians now call themselves property investors

Property investment can be a highly effective means to build wealth; it’s not surprising it’s popular with Australians.

Property has a few unique advantages over other investment classes:

• The ability to generate a new income stream through positive gearing
• Benefit from capital growth as the property appreciates over time
• Improved access to lending as banks see property as a favourable asset class
• Significant income tax advantages

Are you a property investor?

If the answer is no and you’re still on the fence, you might benefit from a strategy that others use to their advantage. Savvy investors are using equity to help them crack into the investment property market.

If you already have a property, read on.

Equity is the firepower you need to become an investor

Many astute investors are using the equity in their home to kick start an investment portfolio. Property equity is simply the current market value of a property against the amount of mortgage owing. The value of equity grows over time as the value of the property increases and the mortgage is reduced.

For example, in Kirrawee, in the Sutherland Shire, property prices have grown a staggering 23.6% in the 12 months to April 2022. That means a property that was worth $1.33 million is now worth $1.64 million, or an extra $310k. Unless you sell, you can’t benefit from that growth, right? Wrong. Equity and can be leveraged while you hold the property.

How to calculate the equity in your property

First you subtract the debt remaining on a property from its current value, for example:

• Property value - $1.6 million
• Amount owing - $900k
• Equity - $700k

Then, lenders apply a calculation that they are prepared to lend against to minimise risk, often that’s an 80% LVR (loan value ratio):

• LVR – 80%
• Lending capability - $560k

This $560k can be used as a deposit on a future property purchase.

We’ve talked about a strategy to get your finance, but what’s the best investment property to buy? There are so many considerations. We break down the main ones into two categories: what type of property to buy and the location.

Multi-rental investment options

It’s important to choose the right type of property to generate a higher return.

Investments which generate multiple incomes are highly attractive. DPN offers income generating properties, including duplexes and dual income properties, or ‘dual keys’ as they are sometimes called, which offer two rents from the one property.

Multiple rents from the one property creates a high rental yield, and the attractive opportunity to create a passive income from the investment.

The benefits of purchasing a new property

Newly constructed properties attract significant tax benefits when compared with established buildings while also having low maintenance costs. Furthermore, new properties rent sooner, and, in some areas achieve 20% higher rent, according DPN’s General Manager, Property Management, Cassie Nancarrow.

DPN identifies emerging growth suburbs then works with Australia’s leading builders, land suppliers and developers selected for their detailed workmanship and proven reputation, to present solid investment opportunities.

Location, location, location

Location is important for both capital growth and rental return. To uncover emerging growth areas DPN’s in house Research Team monitors the nation’s 8,800 suburbs to identify those about to boom, looking for consistent population growth, employment opportunities and sustainable infrastructure.

DPN provide an expert service in property investment and have access to premium investment properties in high growth locations. Get in touch today to find out how you can become an investor.