Make Equity Work Harder: Put Idle Equity Back Into Growth

Think your home is just a place to live? This episode shows how equity becomes a launchpad for long-term wealth. We break equity into plain language, real numbers, and a clear roadmap from one home into a smarter, safer investment portfolio. You get an easy walkthrough of available equity, 80% LVR rules, and bank risk thresholds acting as personal guardrails.

We step through a practical case study: a 600k home, growth-driven usable equity, and a move into a quality 600k investment backed by strong buffers. We track compounding gains across two years, proving why cash savings alone rarely match this momentum.

Hear frank insights on cash flow pressures in 2025, rare day-one positive cash flow, and smart ways to build buffers using interest-only structures, offsets, and low-risk markets with tight vacancy. Learn how to use leverage safely, keep LVRs controlled, and let natural growth strengthen your position.

If a dream home sits within your five-year plan, this strategy can accelerate progress. Build one or two growth assets, unlock options, and increase net worth without relying solely on super or pension.

🎧 Subscribe, share with someone holding lazy equity, and drop your biggest equity question so we answer it next.

Chapters

• 0:00 Why Equity Matters Now
• 0:48 Equity Explained Simply
• 2:30 Available Equity And The 80 Percent Rule
• 4:20 Good Debt And Net Wealth Basics
• 6:48 Equity Vs Saving For The Dream Home
• 8:55 Step By Step Equity Case Study

Transcript

SPEAKER_00: 0:00

Right now, there are millions of Australians that don't understand that they have equity within their property that can help them get to financial freedom sooner. My name is Casey Taylor. I'm the host of the Tailored Property Wealth Podcast, and we talk about all things property investing and finance related. And we are talking about equity equity today. We are talking about the power of equity and how it can help you build your net wealth base or it can help you even potentially get into your dream home. Some people think that if they want to purchase a dream home in a number of years' time, that they can't invest in property now. But investing can actually get you closer to that goal sooner. And in this episode, I'm going to explain with real life examples how this can happen. So, what is equity and how do we understand equity? Equity is pretty simple once you do understand. It's simply the difference between the value of your home and the debt that you have on that home. And then we have available equity that you can use. So if we have a million dollar value in our owner-occupied property and we have a debt of$500,000, that would mean we have$500,000 equity within that property. Now, because typically we can lend up to 80% of the value of a property to avoid lender's mortgage insurance, we would then have$800,000 there. Now some lenders will let you go up to 90, 95% of the value. That is an option. We're second, third tier lenders. However, we're working off that 80, 80% today. If we can go up to 80%, that would be$800,000. But because we've got that debt of$500,000, we subtract the$800,000 from the$500,000 to get that equity position of$300,000 of available equity. So there's a massive amount of equity there that you can use to put into other higher performing assets instead of just sitting dormant in your property. As an investor, you want to be working smarter, not harder. And some people just want to go out there and slug away at savings. But it's far more powerful and advantageous to get that equity if you've got that available. It doesn't require cash. Many people have a misconception that they have to save a cash deposit to get into the next one, which is just not true. Now, why does putting your equity to work matter? There are a number of reasons. You can be in more debt, you can be in more good debt, but still have a larger net wealth base. A lot of people think they just need to pay down their owner-occupied property. But then if that's all you've got into retirement, you're still going to rely on your super and your pension. You want to build assets outside of your owner-occupied home, outside of your super and your pension. That's going to give you more options. Now, you're going to get that net wealth base increase, but you're also going to start to generate rental income on that property. And over time, it won't be straight away, but over time, it will become mutually and positively geared. If you're leveraging equity, that property will not be positive cash flow from day one. Positive cash flow in 2025 does not exist unless you are injecting a massive amount of cash into the deposit. That is the reality. But over time, as we get that rental income growth, as we get the gross yield increasing based on the original purchase price, you will start to generate passive income. And it will take time and it might be multiple properties to be able to get there, unless you get a bit more creative with your strategies, which is possible. But you will start to generate that passive income. As well as that, if your goal is to buy that dream home in five years, you simply saving and saving over that five-year period is going to help get to that dream. However, if you go out there and use that equity that you have currently now and you put that equity to work, that compounding effect on the larger wealth base is going to be powerful because you'll have a larger net wealth base in a number of years' time. And you might be able to exit out of one of those properties that you've purchased, and that will help with cash to contribute to the new purchase. It's working smarter, not harder. Now I'm going to give a breakdown of how you can utilize equity in your owner-occupied home, or it might just be a current investment property you have as your only asset, and then being able to get into another asset and put that dormant equity to work. So let's say five years ago you purchased a property for$600,000. You had an 80% deposit on that property, meaning that you have a debt of$480,000. Now, over that five years, that property has grown to$900,000. You had an interest-only loan, so you haven't paid a cent of that debt off. So your debt still remains at$480,000. Now 80% of that$900,000 is now$720K, not that$480 when you first purchased it. So what we can do now is we can deduct the$720,000 from the$480,000. And that means we have usable equity available of$240,000. Now that is equity we can go to a lender utilizing a broker and be able to extract that equity out, pending that you have the service ability to service that increased debt. But now that usable equity we can use to put towards a deposit on another asset. Now if we assume a$600,000 asset, which is still possible right now in November 2025, as prices continue to grow, that becomes more and more unlikely. But right now that is applicable. Now if you use just$150,000 of that equity, which is a 20% deposit plus cost, it might come out a little bit more than that, but we're going to say$150,000. You can go out and purchase a$600,000 asset. If you have the strategy right, if you use a right professional, that property is going to perform strongly over the next couple of years. You can get 10% growth on that asset over the next couple of years. So in the first year, that property would do$60,000 growth. You'd have a value at the end of the first year at$660,000. At the end of year two, another 10% growth is$66,000. So in just a two-year period, you have now grown$126,000 of capital growth in that asset. 99% of people could not save that amount over the next two years. So this is where it's powerful to use that equity that was sitting there doing nothing and putting that to work. Now, yes, you're going to have holding costs, you're going to have maintenance, you're going to have repairs that comes out of that. But just remember as well, because we have that 240 there, and we might not use that whole amount. As a sophisticated investor, we can borrow a buffer to help absorb some of those costs as well. So it's not going to come out of your cash week to week. We're utilizing that equity to absorb some of that cash flow. And this is what we help clients with, and they don't understand that component of it. If you're sophisticated with your lending structure, you don't have to cop it out of your pocket every single week if you've got that equity there. This is the power of the compounding effect, using leverage and making sure that you're purchasing an asset that's working for you. You don't now have to go and slog out 40 hours per week to be generating that wealth. It's already happening passively in that property. Sure, you're going to have to put some time into it. Your property manager is going to manage that. You're going to automate a lot of it. There's still going to be some time involved, but it's not 40 hours per week. If you do it right, it should be an hour per week or less. That is the power of using leverage. Now, if your goal is to purchase that dream home, you now have that asset that's working for you, growing in value for you. So in two, three, four years' time, you might be able to exit out of that property or exit out of a couple if you purchased a couple. And the net wealth base left over with that property value increase, minusing the debt, that's going to be further cash you can inject into your dream home that you simply would not have had if you didn't do anything and you just sat on it and were trying to save and pay down some of that existing debt. You got to work smarter, not harder. So that is just a prime scenario that you can look at to be able to see the blueprint, to be able to build a portfolio. And once you start to get two, three, four, five properties and they're growing in value, you're creating so much more equity every single year. And then you've got the option to extract that to go into more purchases and build that wealth further. Now, some people say, Well, I don't want to get into more debt. It's scary, it's high risk. You can still continue to leverage and get into further debt and be able to do that whilst mitigating risk. I spoke about your buffers. If you have a large amount of equity, you can structure things in a way that you have a buffer remaining to absorb some of those costs, some of those things that might come up. And it's not coming out of your pocket every single week. You don't have to sacrifice on the week to week because you're able to use some of that equity. And as the property continues to grow in value, even though you've used some of that equity just for holding costs, it will continue to increase in value. If you get that right strategy in place, you use the right professional, they're going to help you invest, lowering your risk, getting into marketplaces that are low risk or lower risk. There's always risk to everything, but lowering our risk. If you kind of stick to that 80% rule when leveraging debt, some people want to leverage higher. But that 80% is a nice safe zone. So you can, as you're building, you can look at your property portfolio holistically and have a rule that you won't extend past that 80% across the portfolio. And we can always look at the banks, and they have they're a large company, they have people who analyze this sort of stuff. If they don't need lender's mortgage insurance for anything 80% and under, that is their risk tolerance. So if you can continue to meet that, that is something that they have as a risk rule benchmark that you can utilize within your own portfolio. And we we know over time that property increases in value. So you might leverage up that 80% and you might sit there for a period of time until you get that growth and your LVR naturally drops, even though you're not paying down debt. So just remember there are safe ways to leverage where it's not so scary. I hope this one's been valuable today in understanding that equity position. There's a lot of you out there, I'm sure, as a property investor, that know how to use equity. You want to use equity, you are using equity. But there's also people out there that may not understand that. Or they're too scared to continue to use even more equity that they've got. They might only do one property instead of two. But you want to put that to work. You want to get the finances in place to structure it in a way where it's possible. If you have those cash buffers that you extract from equity, it's going to help you with the holding costs, even if your rate's higher. It's about getting sophisticated and smart with your finances, which allows you to keep moving forward to get towards your long-term goals. If you have been waiting, sitting on the fence, but you think now you want to get into an investment property, or you know someone who might benefit from this episode, please reach out. We're happy to have a chat and see how we can help you implement some of these strategies and utilize the equity within your property and lower your risk to be able to continue to build towards your future. Hope you enjoyed this episode and we'll see you on the next one.