can you take equity out from a property more than once can you use equity
from one property to buy another can you use the same property to buy two or three times
hey guys eddie delaine here today i want to do another real quick video this video is a
question so i love being asked questions because then i can do quick videos here and try to help
you guys out there with just knowledge and information um the question was basically can
you take equity out two or three times basically that was the short question and i'm guessing the
questions stem from basically you know they've learnt you can use one property to buy another one
take the equity out and use it to buy another one so in my experience long story short yes you
can take you can go back to the same property and take equity out and use it to buy more properties
multiple times so i've done this on from my first property i've probably took equity out
of it two or three times and basically it comes down to multiple factors and multiple things but
i'm going to give you example this is with the position that the person won't say their name or
who they are but basically they had one property essentially and the property was roughly worth
about five hundred thousand they only had a loan on the property for about 200k so i was speaking
to them and i was basically showing them what their options are so i'm going to give you an
example on the whiteboard here basically about how much equity that person could potentially take out
and if you're in a similar position how you can work out how much equity you can actually use and
how many properties you could actually use to vary portfolio so let's just say you've got a property
roughly and it's about worth about 500k now this scenario the loan on the property was only about
200 000 left so to me it comes down to lvr's loan to value ratios now there's another video on this
um definitely check it out if you haven't seen it before but learning loan to value ratios
is extremely important um it's what brokers users what financial advisors use if you're
a property investor or wanna you're wanting to be a property investor you've got to understand the
term loan to value ratio you've got to actually be able to figure out how much available equity
you can use to buy property so to me the answer is very simple if someone has a property that's worth
500k and the loan on it right now is 200k the easy amount of equity that they have available to use
is 200 000. now you might be thinking but they've got 300k worth of equity like
but you've got to do loan evaluation loan value ratio so lvr you first got to work out what is 80
now you can sometimes take up take equity out higher up than 80 percent i've gone up
to 90 sometimes when i've took equity to out to then extract then buy more properties but
if you've go up to 80 generally you don't have to plmi with certain lenders like you want to
pay on why certain others but 80 of 500k how i do the easy mass on that is basically what's 10 it's
50k 10 times 2 is 100k so 100 which makes the lvr 80 400 000 400 minus 200k is 200k available now
you could essentially use that 200k to go off to me you could go from buy four properties with that
with 50k deposits as an example so let's see let's as an example if you could take out 200k
and then let's just say we took our 200k we now have 200k
but so we have 200k the loan has basically gone up on the last one so yes our repayments have
increased but we now have 200k to invest and build our wealthbuilder portfolio so we've got
200k now if i were to buy a property for let's say 300k and i want to do a 10 deposit on that
it's only 30k stamp duty legal fees let's just say we're running for 50. so all the expenses is 50.
and i bought one property and still got 150 left so you could go off and buy
four properties worth 300 000 worth a total of 1.2 million more or less with just 200 000 worth
of equity yes you can do 10 deposits you can do 20 deposits but if a person originally in the
initial position only took out 100k then they still would have had 100k left sitting in there
in that original property doing nothing so they could go back the second time if they only took
out 100 they could go back later on and take out another 100. if the property let's say
if a property that was originally worth 500 000. the loan was initially 200 right then
we extracted equity we took it up to 400 000. so the loan is 400k down right value loan let's say
another five years goes by seven years goes by ten years goes by whatever let's say the value is now
not 500k let's say hypothetically seven years or something let's say eight years go by right
eight years later let's say the value is now not 500k let's say it's worth 800 000. so now what
does what does this do to our loan to value ratio to me it's simple lvr's 50 now assuming whoever's
in this position let's say that person went off and bought four properties as we mentioned before
and they got this one so they've got five in total if they wanted to go on another buying spree then
technically yes they could take equity out of this property they could take it up up to 80 again
which 800k doing the numbers off top my head 10 80 k 20 160 so 160 minus 800 is roughly 640. so
they've still got technically 240k over 200 000 to then take off um take out and then buy another
few properties so that's the short short answer to it basically if the property continues going
up yes you can continue taking equity out however an important thing to understand with this is
banks will not give you the equity out if you buy crap properties if you buy properties and
the rental returns are horrible if you're the average investor in sydney or melbourne
that thinks four percent yields are good three percent yields are good or five percent
odds are you're not going to be able to continue buying 5 6 10 15 20 30 properties like i have
it's a formula of buying properties that are below market value with growth that go up over over time
and buying property with a high yield because the high yield is what allows
your high yields what allows your borrowing capacity
with the banks to allows you to be able to continue taking equity out and then growing
your portfolio over time securely safely of course with a strategy you can't just go out there and
buy you know 20 30 properties not know what you're doing the banks won't even lend you the money so
the the problem with the you've got two different issues with taking the equity out you've got the
equity component which you can do as we saw but you've got to make sure whatever those those four
properties that we spoke about that were roughly 300 000 each if they have a low yield you're
going to get stuck with finance you're going to get stuck with getting loans if they each rent
out if the property that you buy that was 300k roughly if let's say the average rental yield is
7 roughly so the rent property is renting out for let's say 430 per week
hypothetically or if you've got a balanced portfolio some might be cheaper property
some might be more expensive the more expensive properties you go the lower the yield you'll buy
but it's about making sure your portfolio has a good rental return rental yield overall if
it's seven or eight percent you'll find you're going to be able to continue getting loans as
long as you deal with the right lenders and you go from the different tiers downwards
and your finances are in order yes you're still going to have an income coming in from your job
or business or whatever you do but having a high yield allows you to continue buying properties so
short answer yes you can take out equity of one property multiple times but you've got
to make sure you can service to get the actual loan and only if there's equity available so
i hope this video helps if you're after more information uh send us through an email give
us a call um if you have just logged on if you just checked out this video basically
have a free ebook 10 properties by 25 which i wrote about four or five years ago it's completely
free um you can download it on the website so thanks very much guys and i'll talk to you soon
bye
you