Property owners leveraging home equity to ‘get further ahead’: NAB
A new research showed that property owners are unlocking the equity in their homes for a range of reasons but with the s...
With a lot of property wealth contained within equity, one Australian firm sees this equity as not being optimised by investors.
According Voight Holgar of Design Doctors, investors are being held back by a lack of knowledge on fully optimising their portfolio.
“Imagine. Your car is easily capable of 100km/h but you never drive it faster than 2km/h because you don’t know how to. That’s how little we utilise the power of our residential property equity,” Mr Holgar said.
“Simple and inexpensive design improvements can often add many thousands of dollars to the value of a property if you know what to do.”
As a notable example, Mr Holgar uses a Melbourne property that underwent a $70,000 garden and exterior makeover to create an increase of $500,000 for the property’s value. He adds he has seen other examples of cheaper improvements creating yields up to 50 per cent of returns on investment.
“A $20,000 cosmetic renovation only needs to increase the value of your home by $30,000 for you to realise a 50 per cent return on your initial investment,” Mr Holgar said.
“There are very few investment opportunities that offer the potential of a relatively low-risk 50 per cent return within a matter of weeks. And better still, your return continues to compound as long as residential markets experience growth.”
Mr Holgar explained a lack of design skills are a contributing factor towards investors focusing on the "untouched piggy bank".
“Good design pays dividends. A little extra care and attention in research, planning, design and execution can yield a premium return,” he said.
Equity is the difference between the market value of a property and the amount owed to a lender that holds the mortgage or the loanable amount.