Latest / TFS WealthCast / "From Homeowner to Investor: Leverage Your Equity"

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"From Homeowner to Investor: Leverage Your Equity" · TFS WealthCast

• 0:01
  SPEAKER_02: And smart.
• 0:02
  SPEAKER_02: Build well.
• 0:04
  SPEAKER_02: This is the TFS Podcast, where money cost gets real and financial freedom is more than just a goal.
• 0:12
  SPEAKER_02: Without further ado, let's dive in.
• 0:17
  SPEAKER_01: Welcome to another episode, TFS Podcast.
• 0:20
  SPEAKER_01: Today I have Melissa from TFS who's gonna talk about investment properties.
• 0:27
  SPEAKER_01: Melissa, welcome.
• 0:28
  SPEAKER_00: Hi, Pramu.
• 0:30
  SPEAKER_00: Thank you so much for having me on today at TFS Podcast.
• 0:34
  SPEAKER_00: I'm really excited to be here.
• 0:35
  SPEAKER_00: Thank you.
• 0:36
  SPEAKER_01: Brilliant.
• 0:36
  SPEAKER_01: So, Melissa, tell us a bit about your journey in the finance industry.
• 0:42
  SPEAKER_00: Well, uh, without giving away my age too much, I've actually started um doing income tax straight out of uni.
• 0:49
  SPEAKER_00: Um, and I was working in an accounting firm actually outside of the head office is in Dandinong, and I was based out in Ringwood office, and I used to do um clients' income tax returns.
• 1:00
  SPEAKER_00: And whilst I was doing their tax returns, um, a lot of them were asking me how to reduce their tax liabilities.
• 1:06
  SPEAKER_00: And one way was uh to own your own business, um, obviously to by way of deductions, and the other most popular one would obviously be buying properties and and and property investments.
• 1:20
  SPEAKER_00: So uh um that's how I kind of get started in this industry and this journey of mine.
• 1:25
  SPEAKER_00: Um, started doing all their um income tax returns, but the the the gold was also doing their um investment loans at the same time as well.
• 1:33
  SPEAKER_00: So um probably going back about 20 years now in the industry all up, and uh I'm absolutely loving it, and uh it's this is what I do.
• 1:42
  SPEAKER_00: So I don't see myself doing anything else, Pramu.
• 1:45
  SPEAKER_01: Brilliant.
• 1:46
  SPEAKER_01: I mean it's it's always good to have a chat with someone who has that passion into the finance and and how to help people when it comes to the property uh investments and portfolios.
• 1:56
  SPEAKER_01: That's it's amazing.
• 1:58
  SPEAKER_00: It is, it is.
• 1:59
  SPEAKER_00: I I love it.
• 1:59
  SPEAKER_00: I love what I do, I love helping people um and you know walking with them through their journey of property um investment and also building up their property portfolio as well.
• 2:09
  SPEAKER_00: Brilliant.
• 2:10
  SPEAKER_01: So, Melissa, have you bought any investment properties yourself?
• 2:14
  SPEAKER_01: What was your experience like when you have done it?
• 2:16
  SPEAKER_00: Yeah, look for me, I was very lucky.
• 2:18
  SPEAKER_00: Um, I had a really, really um strong sort of uh growing up with single mom.
• 2:23
  SPEAKER_00: She was very, very strong in terms of raising her kids to put their money um in something that's going to grow and and build a future for themselves.
• 2:32
  SPEAKER_00: And she got me in um in into my first property and our kids into our first property.
• 2:37
  SPEAKER_00: I think I was about probably 21 when I first purchased my first property.
• 2:42
  SPEAKER_00: Um and uh I haven't looked back since.
• 2:45
  SPEAKER_00: So my first one obviously being my first home, I lived in it uh for 12 months and then rented it out because I mean personally, I hate living alone.
• 2:53
  SPEAKER_00: I'm scared of ghosts.
• 2:59
  SPEAKER_00: So I rented that out, and from there, my uh you know, um through the years the the property prices started to grow.
• 3:06
  SPEAKER_00: I started to refinance, um tapping into the equity from that property, leveraging off that property, and purchasing a few more down the track.
• 3:14
  SPEAKER_00: So yeah, um, needless to say, I have made mistakes along the way for sure.
• 3:19
  SPEAKER_00: Um, there's some mistakes I will talk to you about today, um, and ones where um it was very fruitful, and and I will also touch on that as well.
• 3:28
  SPEAKER_01: That's for that that's for another episode.
• 3:31
  SPEAKER_01: Absolutely.
• 3:31
  SPEAKER_01: We talk about all about the mistakes.
• 3:34
  SPEAKER_00: Absolutely, there's plenty of that, that's for sure.
• 3:37
  SPEAKER_01: Okay.
• 3:38
  SPEAKER_01: So for someone who wants a house, first home, they bought it now, they've been living in the property one year, maybe two years, you know, they paid about maybe twenty-thirty thousand dollars of their uh capital of the loan.
• 3:54
  SPEAKER_01: How can they use their equity, in your opinion, to buy an investment property?
• 4:00
  SPEAKER_00: Yeah, so that's a very good question, Pramu.
• 4:02
  SPEAKER_00: Look, um, equity means obviously the value of the property versus your your loan balance.
• 4:07
  SPEAKER_00: Okay, so the difference between that is the equity um that you can um you know tap into and uh and and a tap out of it by way of refinancing or cash out, you should put it.
• 4:19
  SPEAKER_00: Um so in order to do that, we do um obviously a valuation first, so a bank valuation um to see what the property is worth, um, and then we do uh a refinance or cash out depending on how much um equity you're actually growing in the property.
• 4:33
  SPEAKER_00: Um and like I said, you know, the rule of thumb is property value versus the loan balance.
• 4:38
  SPEAKER_00: Um so you could do that by way of refinancing and cash out and using that um cash out or the equity release um to put towards another investment purchase.
• 4:48
  SPEAKER_01: Yeah.
• 4:49
  SPEAKER_01: Yeah.
• 4:49
  SPEAKER_01: So um it it's it's simple mathematics.
• 4:52
  SPEAKER_00: It is very simple, isn't it?
• 4:54
  SPEAKER_00: Yeah, it really is simple mathematics, but I think the key point to take away here is actually um the value of the property because it, you know, obviously we've seen um in the current market has slowed down a lot um, you know, post-COVID.
• 5:08
  SPEAKER_00: So um, but um we see it creeping back up now because you know the rule of thumb in uh in real estate is uh property double its value every 10 years.
• 5:17
  SPEAKER_00: So yeah, so um and we're seeing that trend um time and time again.
• 5:21
  SPEAKER_00: So uh it's it's been consistent, I think.
• 5:24
  SPEAKER_00: Um so the it's a good good market, uh the Australian market.
• 5:28
  SPEAKER_01: It is, it is now, especially like you like you mentioned, uh you know, the rates are coming down.
• 5:34
  SPEAKER_01: Uh we can see quite a lot of movements in the property market, the clearance rates are high.
• 5:38
  SPEAKER_01: Uh it it is a very good time to buy, and uh you're absolutely spot on there.
• 5:44
  SPEAKER_01: Okay, so on that on the on the same note that you were explaining, right?
• 5:48
  SPEAKER_01: So what should pe what should people keep in mind when choosing an investment property, especially if it's their first time that they're buying the uh property?
• 5:59
  SPEAKER_00: Okay, so property um type is very, very important.
• 6:05
  SPEAKER_00: So, for example, if a client has the capacity to buy um their first home or their first investment property, I would say go for something that is freestanding.
• 6:19
  SPEAKER_00: So, for example, if you a freestanding home like an established home with land is obviously key.
• 6:26
  SPEAKER_00: Um, that's where the capital growth is going to be.
• 6:28
  SPEAKER_00: It's actually in the land value.
• 6:31
  SPEAKER_00: Um, the house itself, you you know, you can renovate, you can upkeep, make it nice, livable, rent it out, whatever, but hold it long term, um, and that's key in terms of property types.
• 6:42
  SPEAKER_00: I would probably steer clear though of apartments.
• 6:46
  SPEAKER_00: And there are good apartment buying, but um I think for capital growth, I mean it's great for rent to you, don't get wrong, particularly in a city, that it's absolutely gold.
• 6:57
  SPEAKER_00: But the capital growth is very slow compared to that of a freestanding home established home.
• 7:03
  SPEAKER_00: Brand new home with land or even a townhouse that's not, you know, on top of each other.
• 7:09
  SPEAKER_00: So um, so that's what my advice would be to go for something um that you can um outside of an apartment that's going to give you long-term capital growth.
• 7:20
  SPEAKER_01: Oh, listen, that's that's amazing uh advice.
• 7:24
  SPEAKER_01: Um, you know, you don't need to overcomplicate your first investment.
• 7:28
  SPEAKER_00: Correct.
• 7:28
  SPEAKER_01: Understand the fundamentals, the land go land value goes up, you know.
• 7:33
  SPEAKER_01: Uh uh, minimize your cost sustainability of the investment.
• 7:37
  SPEAKER_01: That that's gold.
• 7:38
  SPEAKER_00: Absolutely.
• 7:39
  SPEAKER_00: Brilliant.
• 7:40
  SPEAKER_00: Absolutely, yeah.
• 7:41
  SPEAKER_00: So I mean, look, you know, the um I always brought up that land appreciates in value and building depreciates in value.
• 7:48
  SPEAKER_00: So, you know, take that concept and take that ideology, it actually makes sense long term for capital growth.
• 7:55
  SPEAKER_01: Yeah, yeah.
• 7:56
  SPEAKER_01: As you grow your portfolio, you can add the apartments, you can add uh different kinds of uh uh properties into your portfolio.
• 8:03
  SPEAKER_01: That'll that'll give you better different kinds of return, isn't it?
• 8:06
  SPEAKER_00: Yes, correct.
• 8:07
  SPEAKER_00: It's it's more it's a diverse um diversified portfolio is always great.
• 8:11
  SPEAKER_00: Um you can throw the apartment in the mix, but there's also key factors in apartments there that the some apartments can um increase in value more quickly than others, others can go backwards or even lose money.
• 8:24
  SPEAKER_00: So there's key factors to look out for as well when you're looking for an apartment.
• 8:29
  SPEAKER_00: Obviously, rental return and rental yield is being one of it, but also location, whether it's high density, stuff like that.
• 8:36
  SPEAKER_00: There's so many key points that you need to take care of with if you're looking for an apartment.
• 8:41
  SPEAKER_01: Exactly.
• 8:43
  SPEAKER_01: Okay, Marissa, that that's amazing.
• 8:46
  SPEAKER_01: Um, so before before I finish up for the uh this episode, I just want to ask you, I'm sure the listeners want to know uh from you.
• 8:54
  SPEAKER_01: Um what would what what's one piece of advice you would you you always give to your clients thinking about using equity to grow their wealth?
• 9:06
  SPEAKER_01: So very simplified.
• 9:08
  SPEAKER_01: If you if you dumb it down to a uh uh first-time invest investor, what would be your simplified advice for them?
• 9:17
  SPEAKER_00: I guess my simplified advice to them is um to buy an investment or to buy property and hold it long term.
• 9:26
  SPEAKER_00: Um, you know, property obviously is a um it's a big investment.
• 9:31
  SPEAKER_00: It's probably gonna be the most the biggest investment that you ever make in your life.
• 9:36
  SPEAKER_00: Choose the right property type, hold it long term.
• 9:40
  SPEAKER_00: Once you've got that equity, once that capital growth is there, then we'll leverage off a property, get equity um or cash out from that property and start building an investment portfolio.
• 9:52
  SPEAKER_00: Um, I I think that's um, you know, superannuation obviously um is is a great thing and it's um you know it's help building your your retirement towards your retirement.
• 10:03
  SPEAKER_00: But if you have a look at uh building a right property portfolio, it could do exactly the same thing, even better.
• 10:11
  SPEAKER_01: Yeah, yeah, yeah.
• 10:12
  SPEAKER_01: I'm totally with you.
• 10:13
  SPEAKER_01: Yeah, 100%.
• 10:15
  SPEAKER_01: Um there you go, listeners.
• 10:16
  SPEAKER_01: Um, you you got some really good advice from uh from Melissa uh TFS.
• 10:24
  SPEAKER_01: You want to get in touch with her, uh you know, reach out to her via our website.
• 10:29
  SPEAKER_01: Uh her details are there.
• 10:30
  SPEAKER_01: Um she has a wealth of knowledge to share with you, and and and I'm I'm very confident that she will help you to purchase that first investment property in a heartbeat.
• 10:41
  SPEAKER_01: And I know for a fact that she does these these uh results in in a very short time.
• 10:45
  SPEAKER_01: They're one of the quickest uh uh brokers you will get for results, uh, and that's why she's working at TFS.
• 10:53
  SPEAKER_00: Thank you so much for that, Pramu.
• 10:55
  SPEAKER_00: Really appreciate your kind words.
• 10:57
  SPEAKER_02: Pleasure.
• 10:58
  SPEAKER_02: Thank you.
• 10:58
  SPEAKER_02: Take care.
• 10:59
  SPEAKER_02: Thank you for tuning in to another episode of the TFS Podcast, where we turn knowledge into action and big goals into real results.
• 11:08
  SPEAKER_02: Now, don't forget to like and subscribe and share this episode with someone working towards their next financial step.
• 11:18
  SPEAKER_02: Now, with that being said, until next time, keep building.