As of the last census 65.5 per cent of Australians owned their own home. The majority of this group owns just one property, usually as their place of residence.
What you, and most of these Australian home owners may not know is that your second home purchase is often much easier than the first. Plus, in a market like Melbourne's where long term growth is likely to occur, a second property could generate considerable wealth.
Buying your second Melbourne property
First Home Buyers Australia asked Australians about the biggest problem they faced when obtaining their first home loan. The vast majority of survey participants cited accumulating a deposit and expensive housing.
When buying your second home these becomes lesser issues if you've owned your first for a few years. That's because your equity will most likely have increased thanks to the mortgage repayments you've made and due to the value of your home going up.
This equity can be used as security to buy your second Melbourne property, either as an investment or as a holiday home. If you have enough equity you may not even need a cash deposit.
Equity can easily be used as security to buy your second Melbourne property
You should always speak to financial experts such as mortgage brokers and advisors before making any decisions, but an investment property could be a smart way to help build wealth or secure a comfortable retirement.
Things to consider when using equity to purchase property
If you're purchasing an investment using equity in your home you should take the utmost care when selecting that property.
Buy in an area that is affordable now but likely to increase in value in future, and where rental income can cover most of your mortgage. Signs of a good property and area include:
- Close proximity to public transport and amenities.
- High buyer demand relative to supply – speak to a real estate agent to investigate this.
- Home is in good condition, with little maintenance required.
- Rental income that exceeds most of the property's mortgage and expenses. Get a rental appraisal before buying if you're unsure.
- Evidence that future growth in the area is likely. This could include high buyer demand, increasing population, or future plans for development in the area.
Buying your second home as an investment may be far easier than you think. If you're considering taking the plunge, get in touch with a local expert at Brad Teal to get started.