EP 026: Dark Side of Using Equity to Buy More Properties

By now, I’m sure we’ve all heard about the BRRR method…
Buy, Renovate, REFINANCE AND REPEAT!!! 🥳

For many, it’s one of the first things they’re told when they get into property investing.

At this point, the idea of using equity has become so common that most investors seem to think that it comes without consequence.

Now, I’m sorry to break it to you but…
Equity isn’t what you think it is.

Well, look…
I totally recognise how attractive the proposition is.

If you had a 50% LVR on a $1 million dollar property – that’s $500k in usable equity.
To sell it, you would be paying tax on at least $250,000 of that…
( after CGT tax … not financial advice 😉 )

Alternatively, accessing that equity without having to sell the property is a huge advantage.

I need to clear up some very common misconceptions around doing so.

Equity isn’t free money that you can access for cars, boats, and holidays.

I also wouldn’t recommend leveraging your equity into a new property at a 100% LVR…
I mean, imagine the position of those who did this at the beginning of all these rate rises.

Using equity in the wrong way or at the wrong time could leave you in a vulnerable position with depleted cash flow and larger mortgage repayments.

Now, look.

There are definitely benefits in using your equity when the time and opportunity are right…
But there are huge consequences when it is done wrong.

Don’t worry! I’ve got you…

In this week’s podcast episode, Grant and I are uncovering the dark side of equity that you didn’t know as well as how you can use it to your advantage without eroding your cash flow or taking on unnecessary risk.

We’ll be discussing:
– Why you shouldn’t be stripping out equity
– How we’re improving our cash flow positions
– As well as time in the market, deposits and more!


All information we share is NOT financial or investment advice and is purely intended for entertainment and educational purposes only. Always seek professional advice before acting on any financial decision.

Episode Highlights:

00:00 Welcome to Property and Investing
02:31 Will we invest in a business that grows through leveraging debt?
06:25 What is equity? 
08:19 Why is equity so attractive? 
10:17 Improving cash flow and getting into a negative cash flow cycle
14:29 Finding the balance and art in using equity
15:04 Using cash deposits for property purchases 
19:00 Putting efforts in the right direction as a property investor 
25:07 Time is the only lever that you have 
27:02 Buying a commercial property using equity 
30:04 Risks of not being able to contribute income to your property investments 
30:14 Stripping out equity is not the best strategy for property investing

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