19 Mar 2018

Equity Down Strategy

This strategy is the most common strategy because for decades this is the only strategy investors ever contemplated.

What I mean by ‘equity down’ is investors would typically save up a substantial deposit and buy a property, usually not too far from where they live and rent the property out. Because the deposit was sizeable and interest was only being paid on a loan that amounted to a small percentage of the purchase price, the property produced a passive income. The investors would then focus on paying this loan off as soon as they could. Another purchase would not be contemplated until this loan was first paid off or at least substantially reduced.

Some investors may find this strategy more akin to their risk profile and may be happy to only concentrate on this strategy.

Others may find this strategy too slow and are happy to have higher debt levels provided the income from rental is high enough to cover the repayments plus operating costs, with a built in margin.

We always recommend that you seek professional advice as this blog is for general information only