What is equity and how does it work?
It’s important to know about and think about equity, whether you are trying to build a property portfolio, or simply access capital to put to use the way you want.
So, equity, when should you pull it out of your property? How important is it to pull equity out of your property? Is it advisable to do so?
First, this isn’t personal advice, just general information. Everybody is different and you need to look at your goals.
Understand your strategy
You need to understand your strategy. What are you trying to achieve by building that property portfolio? What are the risks present in your life? Could you lose your job?
This year, in 2020, a lot of people don’t have the cash sitting there that they normally would have, they don’t have the cashflow coming into their bank accounts.
They might want to move from one state to another, but without having that job security they may have had before, it may not be possible to do that move and to purchase a property on the other side. So how do you achieve your strategy?
Getting your finances right from the start is very crucial, because as you build your portfolio and improve your position, it can become harder and harder to reverse poor structuring.
Take what’s yours
When it comes to getting access to equity, a lot of people have the ability to get access to equity but choose not to. They say “I’ll wait six months”, or “I’ll see what happens to the economy”.
In our opinion, if you have the ability to go and access those funds, then go get those funds and keep them at your control.
The reason is that policies change, markets change, property markets change and valuations change.
Many people over the last few years could have pulled out money in equity from their properties, but then banks tightened lending criteria and when they came back needing that equity for whatever reason, to make a move or take an opportunity, they could no longer access the equity. They were kicking themselves.
That’s why, if you can access equity, you should consider doing so. If you need to use it, go ahead. If you don’t need to use it, you don’t have to. It’s still sitting there like a safety blanket should you ever need to access it.
Having the ability to tap into that cash will be beneficial for many, especially given the uncertainty of the world we are in in 2020.
It’s a good idea to look at your finance strategy and review your debt strategy at least once a year to see if there’s something you can tweak or improve to benefit your personal position. It’s a way to minimise risk and put yourself in the best position for growth and to take advantage of opportunities in the marketplace.
When was the last time you looked at your portfolio and asked, “could I pull some money out to advance my position”?
So many people out there might have bought a property five years ago, or 10 years ago, for $200,000 or $400,000. Today, it might be worth $600,000 or more and they don’t realise they have a great opportunity to be able to build a property portfolio, upsize their permanent place of residence, or achieve other personal goals.
If you want to chat to an expert in building a finance strategy, the Zinger Finance team is full of analysts that can help with your options around loan structuring.