As your trusted property investment advisor, The Barnard Group empowers investors who want to build wealth through tailored, risk-managed strategies. Our boutique approach delivers exclusive opportunities and personalised guidance—so your financial goals are met with precision.
In this week’s video, we tackle a key turning point for most investors: using equity to buy the next property. Equity is powerful—it’s how many Australians go from one property to a portfolio. But used incorrectly, it can expose you to serious risk.
Example:
Total equity: $200,000
But not all equity is usable.
Most lenders will allow borrowing up to 80% of the property value (to avoid Lenders Mortgage Insurance in many cases).
So in the same example:
That $80,000 can become a deposit (or part of the deposit + costs) for your next purchase.
Equity is powerful because it lets you grow without saving a full deposit every time.
If your first property gains $150,000 over several years, that growth didn’t require extra work hours or extra savings—it’s simply the market doing its thing while you’re positioned.
Used well, equity creates a snowball effect:
1 property grows → access usable equity → buy property 2 → both grow → repeat.
But the same snowball can crush you if you over-borrow or structure loans badly.
Option 1: Standalone loans
Each property has its own separate loan account and security.
Why it’s better:
Option 2: Cross-collateralisation
This is when the bank links multiple properties together under one overall loan structure.
Why it can be a nightmare:
Clear rule of thumb: push for standalone loans wherever possible. If a broker is casual about cross-collateralisation, treat that as a red flag.
Even if you have usable equity, you still need borrowing capacity.
Banks assess:
It’s common to see investors with hundreds of thousands in equity who still can’t buy again because their income won’t support another loan under the bank’s serviceability rules.
Equity is fuel. Borrowing capacity is permission.
This is where portfolios blow up: investors treat equity like “free money” and pull out as much as possible, as fast as possible.
If any of these happen:
…a maxed-out portfolio can become cash-flow negative quickly, leading to panic selling at the worst time.
Many investors use a blend over time: IO while building → P&I later for consolidation and security.
This isn’t the place to DIY.
A strong team typically includes:
Finance structure becomes the backbone of your portfolio. It’s worth getting it right early.
A client (let’s call her Emily) had a property that gained about $200,000 in value. Her bank suggested cross-collateralising to make it “simple”.
Instead, we used standalone loans. The benefit: when her second property grew, she could access equity from it without the bank dragging the whole portfolio into a revaluation and restriction cycle.
That flexibility is what helped her buy again—momentum stayed intact.
Equity is the fuel. Finance structure is the engine.
One without the other won’t get you far.
Your checklist:
Used wisely, equity can be a launchpad. Used recklessly, it can derail your goals fast.
Most lenders lend up to ~80% of the property value (without LMI in many cases). Usable equity is 80% of value minus your current loan balance.
In many cases, yes—because it can reduce flexibility and allow the bank to control outcomes when you sell, refinance, or restructure.
Maybe, but not guaranteed. Borrowing capacity is based on serviceability, not just equity.
A common rule is 3–6 months of expenses in an offset account, depending on risk tolerance and portfolio size.
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