How Much Equity Do You Have Now?

My gearing is only 30% and therfore 70% equity.

I have sold a property recently and am waiting for future opportunities that will arise over the next 2-3 years.

I want yields and interest rates to start to rise a little.

“So when these opportunities arise, do you think you’ll increase your gearing or stay at about the same as now?”

Yes I will. But I need to consider how much I can support these properties. In then past I never saved a deposit, I just used the equity in the previous property.

Now that prices have stablised and I dont expect too much growth in the next 3-5 yrs, I either need to save a deposit or wait for rents to go up or reduce what we as a family spend.

With a young family, recent renovations on PPOR and holiday to Canada (sister in laws wedding – so we gotta go), I have found it difficult to save a deposit for new investment properties.

I am a long term investor and in no hurry.

Hi GP

Good question. As we are relatively new to property investing (10 months), it is good to read how others are managing this.

As for ourselves, we owned our own family home 100% and last year set up a family trust. We have since purchased four rental properties under the trust, which are positive cashflow. We have also had capital gain in that time on our own home and our rentals. We have borrowed all but $3000.00 in the purchase of them, using equity in the family home.

We are not concerned if the housing market rents flatten out or house prices drop a little as predicted, because firstly my salary can subsidise the rent and secondly, we have enough in savings to pay off three quarters of the mortgage over the rentals if needed.

We decided to purchase this way as we thought that by keeping our savings, and mortgage basically 100% in the purchase of the rentals, we would have money in reserve and be using the banks money to our advantage. With the remaining equity in the family home and with capital gains received, we still have the ability to purchase further rentals without breaking our savings. We are comfortable in the way we are heading at present.

We would like to purchase as many rentals as possible without over committing and then sell off a portion in around ten years to pay off most of the remaining mortgage utilising capital gains, our own savings and ten years of tenants paying rent. I imagine two bust and boom cycles (if and when?). We could then reach our goal which is to be retired at 45 and living on passive income.

Does anyone else on the forum have views if we should be doing something differently to maximise our returns. I would be interested to read positive and negative comments. We can only learn from everyone’s experiences.

Regards

SPT

100% + cash and in no rush

Im at a stage where i will not sacrifice lifestyle to become filthy rich. I figured i only need a reasonable disposable income to be happy.

Will probably add 2 more IPs (good areas and neg geared) when i feel “real” value is back in the market Im looking at .

HI there GreatPig,

Well, our equity levels aren’t as high as everyone else’s but we’re comfortable with where we are at.

4 IP’s – 2 have 20% equity, 1 has 30% equity and 1 has 50% equity. We are comfortable with this equity level as IP’s are paying for themselves and will do so even if interest rates rise a couple of %. If they rise beyond that we know we can afford to pay some into the mortgages or perhaps rents will rise a bit by then too.

Hi,
I have sold two ip’s and will pay my house of before october have 3 properties left.

Total equity about$400,000. Now planning to do something different and build and develop.

Getting closer to retirement hopefully around 40.

Dom[biggrin]