Young buyers invest using family home as equity
Today, more youngsters are looking to get on the property ladder and one way that they are succeeding in doing this is by utilising the equity in their family home to purchase property.
Many of these young adults ideally are looking to live in the CBD or in the inner city to be close to their workplace, as well as the local amenities including shopping centres, restaurants, nightlife and entertainment. But in some cities such as Sydney, properties in these areas tend to be unaffordable due to their prime location, making their dream of buying here just a dream for the moment.
By using the equity in the family home, this makes purchasing a property for young people far easier. Firstly, this home might already be paid off meaning that there is a large amount of equity to draw upon as well as the home acting as security when it comes to applying for a loan.
The parents may be happy where they currently live and are in no hurry to move or downsize; thereby being happy to use some of the equity in their home to help out their children. They might also see it as an investment opportunity for themselves, especially if they are looking to buy in a high growth area.
It is important to remember that even though these young adults may be working in the city, actually purchasing in the city might not be the best place to buy to receive the greatest levels of returns. If they are clever, they should actually purchase in a cheaper area that is up and coming which is expected to see a rapid growth rate.
They can then live in the property for 6 months if in Sydney and claim their first home owner’s grant, then move out and turn this property into an investment property where they can start earning rent to cover the mortgage repayments.
This in turn allows these youngsters to move closer to the city and rent a property whilst building on the equity in their property so that they can purchase another investment property in the future.
Published on 11th of December 2014 by Marty Stanowich