Property investors –how do they do it?

Financial advice and mortgage management tips with local mortgage advisors, Loan Market the country has found itself in a position, due to decades of Government policy, where we’re heavily reliant on private landlords to put roofs over heads.

It’s hard enough to buy a home to live in, so how do property investors manage to buy rentals? Answer: once you’ve purchased your first property, it sets you up to purchase more properties over time.

Let’s look at a typical example:

Ross & Rachel* purchased a home in 2013 for $500,000 funded by a 10% cash saved deposit of $50,000 and a 90% mortgage loan of $450,000. 10 years later in 2023, they’ve paid their mortgage down to $385,000 and the value of their home has increased to $1,000,000.

They want to purchase a rental property but they don’t have any substantial cash savings as they’ve been concentrating on paying their mortgage down. Banks will look at the value of their home of $1,000,000 and (assuming they meet affordability criteria) allow them to borrow up to 80% of that value to raise the deposit for the new property which is $800,000 maximum. $800,000 maximum minus their $385,000 existing loan = $415,000 ‘available equity’.