How To Calculate Usable Equity
08 APRIL 2020 | IN LENDING
Investment properties as part of your retirement plan is a win for many families. It can be the difference between squeezing simple pleasures into your budget week to week and exploring the world once you are retired. Many of our clients, everyday mums and dads, are on track to retire with a million dollars or more because of the investment property advice we give.
Did you know it is possible to purchase an investment property without saving a cash deposit?
The key to unlock your potential millions is finding out how much ‘Useable Equity’ is in your existing house that can be used as your deposit for the investment property.
Many of our clients, everyday mums and dads, are on track to retire with a million dollars or more because of the investment property advice we give.
Use the Calculate Your Usable Equity Worksheet.
Step 01 - Write down the market value of your property.
Step 02 - Calculate 80% of that value. Using a calculator, enter the market value. Multiply it by .80. The result is 80% of the market value of your property.
Step 03 - Subtract your existing mortgage.
Step 04 - Write down the balance.
Step 05 - This is your 'Useable Equity', which is also referred to as 'Available Equity'.
Step 06 - Multiply your useable equity by 5 to find out your approximate purchasing power for an new build investment property.
Step 07 - Multiply your useable equity by 2.5 to find out your approximate purchasing power for an existing property investment property.
Step 08 - Compare the end result with current house prices. You are ready to explore an investment property if your useable equity is enough to use it as a deposit on a house, either a new build or an existing property.