Transforming Equity into Opportunity: A Case Study in Strategic Property Investment

When Riddhi and Rahul (names changed for privacy) approached us, they had a clear goal: to build a sustainable property portfolio. Despite having over $700k in equity in their home and $300k+ in cash saved in their offset account, they faced a major challenge: their borrowing capacity was capped at just $420k. This scenario highlighted the critical importance of a well-thought-out investment strategy and having the right team by their side.

Strategy and Execution

To overcome their borrowing constraints, our expert panel recommended structuring their investment through a trust structure. This approach not only optimised their financial setup but also provided the flexibility needed for future portfolio expansion.

When you take the right professional advice and structure your property investments correctly, you can continue building your portfolio without hitting roadblocks.

Property Acquisition

• Purchase Price: $505,000
• Deposit (20%): $101,000
• Miscellaneous Costs: $20,200
• Loan: $404,000 (Principal & Interest Loan)
• Total Cash Required: $241,200 (including $120,000 for renovation)

The property provided an excellent opportunity for value-add through a strategic renovation. After a carefully planned four-month project, the property’s valuation increased significantly.

Post-Renovation Outcome

• New Valuation: $725,000
• Withdrawable Equity: $176,000
• Profit: $156,778
• Rental Listing: $640 per week

Financial Breakdown (Projections)

• Annual Rent: $33,280
• Property Management Fees: $2,496
• Annual Interest (Investment Loan): $24,240
• Other Annual Costs: $6,312.50
• Net Cash Flow p.a.: $231.50

Key Insights

• Strategic Structure Matters: Using a trust structure enabled Riddhi and Rahul to maximise their financial capacity and secure a high-growth investment.
• Renovation as a Value-Add Strategy: Targeted upgrades significantly boosted property value, creating equity to fund their next investment.
• Rental Income Optimisation: Accurate rental appraisal and smart marketing led to better-than-expected returns.
• Cash Flow Efficiency: Despite early limitations, the property is now generating positive cash flow, a testament to the power of strategic planning.

Trust Structure as a Smart Investment Tool

A trust structure can help maintain and increase your borrowing capacity. Some lenders assess trust liabilities separately from personal ones. This means debts within the trust may not impact your borrowing power, allowing for more acquisitions without straining your financial position.

Additionally, if a trust-held property is positively geared, an accountant can issue a letter verifying the trust’s independent servicing ability. This can persuade lenders to disregard the trust’s debts when assessing personal borrowing capacity.

(Disclaimer: This is not financial advice. Please consult with qualified professionals for advice tailored to your situation.)

This case study showcases how expert guidance and strategic planning are essential when building a property portfolio. By leveraging a smart financial structure and focusing on value-add opportunities, Riddhi and Rahul turned their equity into a profitable, cash-flow-positive investment, setting a solid foundation for future growth. Their journey is proof that the right advice can make all the difference in property investment success.

If you’re looking to build or expand your property portfolio with the right strategy and expert guidance, our team is here to help. Get in touch with us today to start your journey toward smarter property investments.

Company: Ash Buyers Agency
Phone: +61 434 111 200