Mary King's Blog
Living on the Equity in Your Real Estate
Because property values normally double every 7 to 10 years one of the reasons for building a substantial property portfolio is that you can borrow against the equity that has accumulated in the properties, by taking out a line of credit. This is money you could live on.
This is passive residual income. You put in effort to buy the properties and as the equity grows over time, you are creating a passive income. You can then live (it may be simple living) on the extra value in your properties. The income from tenants pays the interest on the money you borrow. The more properties you own the greater equity you build. Passive income frees you up to live, to work at something you want to do or to build wealth in other ways.
In an article entitled How to Develop the Mindset of a Super Successful Property Investor Michael Yardney (www.PropertyUpdate.com.au) wrote "The rich know that as the value of their properties increases they can borrow against this increasing value. When they receive these borrowed funds they can take this money, without paying tax on it, and use it for whatever purposes they desire."
This growth in equity just happens. Sometimes there are periods when the property value increase moves slower than at other times, in fact it may even go backwards for a while, and then, invariably, growth returns again.
When you own property the banks are usually willing to lend you money by taking a mortgage over the property.
If you're still waiting to buy your first property, I believe a good time to buy is approaching. Save your deposit and then get ready. Start researching and preparing yourself to buy by doing your homework now.
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