The RBA finally cut the official cash rate in February, bringing some relief to mortgage holders after more than four years without cuts.

More rate relief is tipped to be on the way, though economists are divided as to when further cuts may occur and exactly how low rates will go in the easing cycle.

But it’s not just people paying off a home loan that stand to benefit from cuts.

When the RBA embarked on 13 rate hikes between 2022 and now, people with mortgages found themselves having to pay hundreds and even thousands of dollars extra each month.

But people without mortgages also felt the effects in the form of massively reduced borrowing power. If they were looking to buy property, they suddenly found themselves sliding further and further away from their goals.

To put it into perspective, someone who could have had a $1 million loan approved in 2021, would have been hard up borrowing $700,000 just two years later. That’s a 30% reduction in borrowing power.

Imagine what an investor could do with that missing $300,000? They could have had deposits on multiple positively geared investment properties, which could pay themselves off while growing in value over time. That missing $300,000 could have been turned into $600,000 pretty easily in the next growth cycle.

So now that some of that borrowing power is beginning to creep back, what is the best way to seize the opportunity to boost your wealth?

It’s a return to the tried and true B Invested method. By buying properties for below market value, with strong rental returns and upside for capital growth.

Spotting growth opportunities

First, it’s important to make money on the way into the market.

A property may look great, have reliable tenants and be in a good suburb, but there’s no point paying more than it’s worth.

If you can get it for below market value, you immediately create room for growth and the potential to accumulate fast equity that can be pulled out and used to buy your next investment property.

Whether you are buying at the bottom of a market cycle, are able to secure a property off market, or can get a home with great bones that’s in need of a superficial renovation, a below value deal lays the foundation for a bigger portfolio. You have equity when the market is growing and a buffer if the market does experience a value drop.

Where and why?

Now consider the location. Properties near major cities or big regional areas, but at the affordable end of those markets, can be sound choices. As inner suburbs grow in value through multiple property cycles, the ripple effect means neighbouring suburbs generally follow suit.

A $300,000 property is likely to double in value a lot faster than a $1 million property, so if you are able to leverage equity and accumulate a portfolio of the cheaper properties, there is more upside for long term growth.

If you can time a below value purchase to be before a market growth cycle, your property will be positioned for maximum upside. If your strategy is long term wealth accumulation, you can hold that property forever. If it’s positively geared, it will eventually pay itself off and will then be an unencumbered asset returning rental income and further value growth.

Yield and cash flow

For a property to be positively geared, the rental income you receive from your tenants must cover your mortgage repayments, property management fees and other associated costs and still leave you with some leftover cash.

This ensures you are not having to find extra money to cover the weekly costs of an investment property.

The property should also appeal to a large pool of tenants, so you can avoid costly vacancy periods if your current tenants move on or break their lease.

Properties at the affordable end of the market are good for demand from tenants. A family home worth $300,000 in a regional area or in the outer ring of a capital city is more likely to command $400 or more a week in rent than a $2 million house getting $2500 a week, as the need and demand for the cheaper home is far greater.

With all this in mind, you can turn that boost to your equity into long lasting wealth.