Unlock equity to invest in property

I’m glad that you are looking to the future and asking some really valid questions.

There is a 10-year age gap between the two of you and at this stage I’d like to see Leanne investing more into super than Paul. Uncertainty about future legislative changes isn’t really a reason to hold back, and Leanne’s time frame is reducing. If she can afford the maximum contributions, it’s a good idea to make them, as she will reach the age where she can access these contributions while Paul is likely to be still working and not needing to access his own super.

He has a good 20 years to go and his strategy could be to contribute more to the extra repayments on the mortgage, rather than those extra super contributions just yet. It’s definitely a great time to be doing that – while rates are still so low, more of your repayment can be paying off the principal. If you can have this paid off within the 10-year mark, the repayment amount can then be diverted to Paul’s super about the same time that Leanne would be drawing down hers.

In reducing the mortgage, the equity in the family home is being increased, even without growth in the market. While you’re both working, I feel that it is a great time to unlock that equity by leveraging against it into some strong property investments, which have the capacity to grow in the short term. The dual income puts you in a great position to borrow, and the right investment properties will

improve your net worth, which must happen now as I don’t count your own home as being an asset, since you have to live in something.

Which brings me to my final point. Investing in a holiday home is the bad idea in a bunch of pretty good ones. The areas where most people like to holiday rarely have strong growth drivers, and even if you can get enough rent to cover its costs, a holiday home is unlikely to grow well enough to add to your net worth. Most people use the excuse of “investing” to get into a holiday home that they can use now but it’s rarely a good idea and can have negative tax implications if you use it yourself.

You’re far better building a nice little portfolio of, say, six to eight properties (which you can actually do now given the level of equity you have) that all grow well and improve your asset base, and later sell one to swap it for the holiday home you desire. This portfolio of properties can then sit untouched all the way until Paul retires, as it’s likely that his wage, combined with Leanne’s super drawdown, would be enough to cover personal expenses that no longer need to support a personal mortgage once Leanne is out of the workforce.

Then when Paul is ready to retire, there should be a good amount in his super plus a portfolio of properties that has had 20 years to grow, at which time you can either continue to hold and live off the rents or sell each as you need to get at the money they have made for you.