Bulletproof Investing

CHAPTER 15Turning up the volume

As time goes on, returns amplify. If we turn up the volume on your bulletproof investment strategy (for simplicity, we will use the same assumptions for growth rates as previous chapters), by year 5 property 1 (from the previous chapter) would be worth $700 000 and you'd owe $530 000 (I've assumed you haven't paid back any of the loan amount, which would be the way to go if you still had debt on your own home). Property 2 would be worth $600 000 and you'd owe $450 000.

Take a look at table 15.1 (overleaf) for the year 5 numbers.

Table 15.1: equity position — two properties, year 5 (90% LVR)

Year 5
Property 1	Property 2
Value	$700 000	$600 000
Debt	– $530 000	– $450 000
Equity	= $170 000	= $150 000

Borrowing 90 per cent

As we've seen already, you can borrow up to 90 per cent of a property's value. In the case of property 1, that would amount to $630 000 (90 per cent of its year 5 value of $700 000) less the amount you currently owe ($530 000). For property 2, you could borrow up to $540 000 (which is 90 per cent of $600 000) less the debt amount of $450 000.

So, if you wanted to buy more properties, in year 5 you could potentially borrow $100 000 against property 1 and $90 000 against property 2. Table 15.2 sets out this information.

Table 15.2: available equity — two properties, year 5 (90% LVR)

Property 1	Property 2
90% of today's value	$630 000	$540 000
90% of purchase price	– $530 000	– $450 000
Available ...