Looking to purchase your first investment property?

Valuation of the home is: $1,000,000

Loan against the home is: $800,000

Valuation of the home: $1,150,000 (+15%)

Loan against the home: $700,000

Banks under normal circumstances will allow you to borrow up to 80% of the value of your home. So hear we could then increase their loan amount to $920,000

This means they now have access to $220,000 for a deposit on their investment property

Now that Paul and Jane have access to their deposit they can now look to purchase their investment property. 

Here they have chosen to purchase a property with:

Valuation: $500,000

Rental income: $25,000 (5% yield)

On top of the $220,000 that was cashed out, we will secure a second loan to fund the rest of the purchase. 

Including fees like stamp duty Paul and Janes new lending would amount to: $517,372.40

Stamp duty and other fees of $17,372.40

*This fee has been calculated based on a purchase in NSW. Please contact us if you wish to receive a stamp duty calculation applicable to your state.

Here we would use Paul and Janes new rental income to pay for some of the new loan repayments. 

Their loan repayments would be $3,202 per month.

The Rental income would be $2,083 per month.

So here 65% of your loan repayment is covered by the income generated from the property

*repayments are based on a $517,372.40, at 6.30%, over a 30 year term. This does not reflect any current lender offer and is a hypothetical loan product

Notably this would be an aggressive investment strategy, and may not be for everyone. Everyone should always consider their personal circumstances and risk tolerances when forming their investment strategy. 

However, Paul and Janes situation does convey the power of real estate investment. The bank will allow you to borrow the money to make the investment, and then your returns pay for a reasonable amount of the additional cost you incur. 

Now all Paul and Jane need to do is make their minimum repayments until they retire, and they own two properties outright.