Paul Glossop: Welcome again guys to Pure Property Investment one on one. I’m joined again today by Ross Le Quesne. Ross, thanks for joining us, mate. Ross is the principal of Aussie home loans in Parramatta and Rouse Hill.
We have had some discussions over the last couple of months, and I guess the last five years of Sydney and Melbourne having good strong year-on-year sustained growth has left a lot of owner occupies, as well as investors with portions of equity or positions of equity in their investments or their owner-occupied properties, which are far beyond what they were back around 2010-2012. And this is probably a question I get asked a lot by investors of ours who have one or maybe two properties, and have a fair bit of equity in them, or maybe just have an owner-occupied or a home residence, and have a fair bit of equity, and have the discussion about, “How do I access that money, and how can that money be, therefore, reinvested into a property or anything else in the property space”? I’m sure, mate, from your side, I think you’ve probably seen a lot of refinancing over the last few years, and the do’s and sometimes the dont’s of what people should be considering when accessing equity and their properties.
Ross Le Quesne: That’s a great point, Paul. So, with accessing equity, there’s a number of considerations to make. Obviously, the growth, as you mentioned, has been huge, and people do access equity. So, some of the key things to consider – “Do I stay with the same lender, or do I look to refinance to an alternative lender?”
Quite often, there’s deals done, and you will save quite a lot of money by looking to access a different lender at this point in time to access the equity. So, when you’re accessing the equity, your property gets revalued, and we go off the latest valuation to access the equity. Yeah, quite often you want to keep your owner-occupied debt and your investment debt separate, so we recommend setting up different loans. For that, you may want to pay interest only in some cases, on the equity that you’re borrowing for investment purposes. As you said, you can use that equity for a range of reasons, whether it be deposits on one or multiple investment properties. It could be used for renovations, it could be used to build a granny flat, to increase cash flow on a property. So, there’s a number of uses for equity.
Paul Glossop: Yeah, no, it’s a good point. I think sometimes they’re probably a trap for maybe… I don’t want to call people lazy, but maybe the more complacent investors who sit there with a lot of equity in their portfolio, that haven’t actually achieved their long-term objectives, but are just sitting there with money effectively in the bank, but they decide to say, “It’s too hard basket, I’ll do it another year”. Their lost opportunity is exponential, and I think speaking from personal experience, I can attest to the fact that right now I’ve accessed a bunch of equity, probably a couple years back, and let it sit there in an offset or a line of credit as it is, and I’m now drawing on a certain portion equity to do a subdivision, which I otherwise wouldn’t have had pure cash to do so. But, the equity has now allowed me to fund a construction loan, which I haven’t had to take yet. I can use that equity at a lower percentage, I can develop this property, and now it’s going to create more equity in that property at the same time.
There’s different ways, there’s so many different ways you can do it, but I think ultimately getting a kick in the butt is sometimes to say get your properties valued at the right time, understand your net position, understand is that going to therefore, allow you to release that cash, reinvest it into the right assets, and create the ultimate or overarching objective you’re trying to achieve. And if you’re not there, then you should be asking or working with your broker to get there. And always understand your position, and, like you said, which banks are going to give you the right conditions to get the money at the right time, and the right money and the right costing of that money as well.
So many things to think about. So many things to consider, but I think that’s just probably the tip of the iceberg when it comes down to accessing equity. If you do want to chat with anyone from Ross’s team or himself, feel free to give him a call at the number at the bottom of the screen, and likewise, from our end, feel free to contact us for any property-related questions, and we’ll chat to you soon. Cheers!