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In simple terms, equity is the difference between what your home is worth, and how much you owe on it. For example, if your home is worth $400,000 and you still owe $250,000, your equity is $150,000.
Within five to ten years of owning a home, you will have built a sizable amount of equity. If you are looking at purchasing another property, banks will generally lend you up to 80% of a home’s value without having to use Lenders Mortgage Insurance, and you may be able to access a portion of your equity to use for the remaining deposit.
For a closer look at using equity, check out RateCity’s guide to using home equity to buy an investment property.
House and land packages are a great way to reinvest your equity and make a return by using it as a rental property.
Packages offer convenience and the homes are specifically matched to suit the land. Building a house and land package will also result in paying less stamp duty. This is because you only have to pay stamp duty on the value of the land as the home hasn’t been built yet.
Potential investors should also consider the benefits of higher quality materials and construction techniques that new homes offer, resulting in little to no maintenance costs, energy efficient technologies and warranties on the home, its fittings and appliances.
Check out all the latest house and land packages by Hotondo Homes here.
When looking to use your equity, the bank will take into account your age, income, family, cost of living and any additional debt you may have incurred. It is also wise not to use every last cent of your equity so you can give yourself a safety buffer in case of emergencies. Before you start building your property portfolio, it is best you speak to your banker or broker.
*Hotondo Homes is not an authorised financial adviser so please seek professional advice for your banking enquiries.
You may have multiple tenants over the years at varying stages of their family life, so a versatile design where a study can be turned into another bedroom or a second living room could be ideal.
When building or purchasing an investment property you’ll want to take every step possible to ensure you will get the greatest return. Factors that can impact this include:
There are more financial benefits when you build an investment property compared to buying an existing home, including fewer repairs and you’re able to claim depreciation at tax time.
Property can be less volatile when compared to shares or other types of investments.
Property is tangible – you can see exactly what you’re buying.
You are able to rent out the property to gain a second income. If it’s negatively geared you will need to pay the gap between rental income and the mortgage repayments. If it’s positively geared you will have more money in your pocket.
Capital growth – the value of the property may increase over time.
You are able to gain tax benefits for negatively geared properties, depreciation and other expenses that you might have to pay as a landlord.
What to consider
It can be expensive if the property doesn’t have a tenant, if there needs to be any repairs and paying mortgage repayments.
Mortgage repayments can be affected by interest rates, so if there are any increases you may have to pay the difference.
Negative equity – if the value of the property goes down, the property might not be worth what you owe.
Capital gains tax – if the value of the property goes up, when you sell the house you will have to pay tax on the value increase.
It’s best that you speak to a certified financial advisor prior to buying an investment property as they will be able to help establish what would be the best option for you.
The Milestone Range
The Milestone Range is filled with designs perfect for investment properties. These designs are both versatile and practical making them the ideal choice for investors.
With a wide range of designs available including single and double storey, terrace and duplex properties investors are sure to find a home that will suit their needs and help build their property portfolio. Visit hotondo.com.au to find out more to find out more about investing in property.
*Hotondo Homes is not an authorised financial advisor so please seek professional advice prior to buying an investment property.