The low interest rate environment is providing an opportunity for property investors to rebalance their portfolios, an industry expert has explained.
During a recent recording of The Smart Property Investment Show, Pure Property Investment’s Paul Glossop discussed the implications that historically low interest rates will have on investors.
Mr Glossop and host Phil Tarrant noted that principal and interest owner-occupiers are at 2.05 per cent for three years, while the big four banks are offering investor loans at under 3 per cent.
“It was interesting to hear those numbers and doing some quick back-of-the-napkin maths on fixed interest-only rates for investors who are holding assets at say 5 per cent gross. It doesn’t take your listeners too long to figure out what it means for cash flow and assets,” Mr Glossop said.
Mr Glossop believes once the dust settles, it could be “pretty amazing to think what this means for cash flow over the short, medium and long term” for investors.
“You can start doing the maths on your own portfolio. If you shave off a percentage point of fixed interest-only rates, you can see clearly you’re going to have thousands of extra dollars injected into your portfolio on a yearly basis,” he said.
Discussing how it impacts him personally, Mr Glossop highlighted the thousands of dollars he is saving by simply having a conversation with his bank.
“I’m doing a massive refinance. I’ve got literally millions of dollars in debt sitting out there in the ether and it will give me an extra income position of 30 to 50 thousand dollars a year just by some clever money moving over the next month or two,” he explained.
Not only are investors saving money, refinancing allows property investors to completely rebalance portfolios, which can have lasting impacts on their overall portfolio balance.
“Anyone looking to invest in property, these are the things that turn portfolios from negative to positive or from positive to passive income, sustaining your lifestyle income type of scenarios,” Mr Glossop explained.