Unlocking equity for investment

With vacancy rates at an all time low combined with soaring rental values and a significant drop in interest rates there’s never been a better time to look at jumping in to the investment property market.

And the good news is that there are investment opportunities across almost every market. So it doesn’t matter whether your budget will only stretch to a studio apartment or can comfortably afford a row of terraces – as long as you buy wisely a sound investment is within the reach of most budgets.

If you’re an existing home owner you may be able to give your buying power a boost by tapping into the equity that’s built up in your home.

What this essentially means is that you may be able to access the accumulated value that has built up in your property over the years or as the amount owed on your mortgage has fallen.

The value of this equity can then be used as a deposit for an investment property with an additional investment loan used to secure the remainder of the purchase.

What many would-be investors often don’t realise is that a lender may factor in the rental value the property will generate as part of their calculation when considering what they are prepared to lend. As long as you can comfortably cover any shortfall between the rental income and the loan amount you should be in a strong position.

Moreover, unlike your home loan there is tax efficiencies linked with a loan taken to finance an investment property. For example, any gap between the annual rental income and expenses – such as interest paid on the loan plus water rates, insurance, maintenance and so on – can be offset against your taxable income.

Property investment has been a trusted wealth building tool for hundreds of thousands of Australians over the years. Just make sure that you talk to your broker to assess what you can comfortably afford to borrow and to consider the type of loan product that best suits your needs.