If you’ve owned property in Western Australia for the past few years, there’s a good chance it’s worth considerably more today than when you bought it.
For some property owners, that increase in value has created substantial equity, which can lead to an obvious question:
Could I use some of that equity to buy another property?
Potentially. But before you start looking for your next investment, there’s a more useful question to answer:
What does that equity actually allow you to do?
Having equity and being able to access it are not necessarily the same thing.
Understanding the difference can give you a much clearer picture of your ability to build an investment property portfolio.
Why build a property portfolio in the first place?
Most people don’t set out to own three or four properties simply because they want more properties. There’s usually a bigger objective behind it.
For some, it’s about building wealth outside their employment.
Others want to create an additional source of income over time, prepare for retirement or simply give themselves more financial choices in the future.
For a business owner, there can be the motivation to build a property portfolio as a way of creating assets outside the business as well.
Whatever the motivation, if you already own property, some of the financial resources for your next purchase may already exist within the properties you own.
You may have more equity than you realise
Equity is simply the difference between the value of a property and the debt secured against it.
If your property is worth $1 million and your home loan is $400,000, you have $600,000 of equity.
That doesn’t mean you have $600,000 available to fund another purchase because lenders will generally only allow borrowing against a property up to a certain percentage of its value without additional requirements or costs.
As a simple example, if a lender was comfortable with total lending of up to 80% of a $1M property value, that would represent $800,000 of lending.
If you already owe $400,000, your $600,000 equity translates to $400,000 of usable equity.
The calculation itself is relatively straightforward. The more important question is what you could do with it.
How can you use equity to buy an investment property?
Using the above example, you’ve identified $400,000 of usable equity in your existing property.
Rather than having to save the equivalent amount in cash, you may be able to access that equity to contribute towards the deposit and purchasing costs for another property.
You may not have accumulated hundreds of thousands of dollars in savings, but the value of the property you already own may have.
That increase in value can potentially create opportunities that weren’t previously available.
There is an important consideration, though: Accessing equity means borrowing more money.
It isn’t free money created by an increase in your property’s value.
If you release $400,000 of equity, you’re increasing your debt by $400,000.
That additional borrowing needs to be factored into the overall finance for your next purchase.
How is the equity actually accessed?
There are different ways of structuring lending when existing property equity is being used towards another purchase.
For example, additional lending may be established against your existing property and used towards the deposit and associated purchasing costs, with a separate loan secured against the new investment property.
Using the previous example where you have $400,000 in usable equity:
As an example, consider an $800,000 investment property purchase:
20% deposit funded from equity in the existing property: $160,000
Stamp duty and other purchase costs: $40,000 (rounded estimate)
Total deposit and costs: $200,000
New investment loan to complete the purchase: $640,000
Importantly, you haven’t used all of the available equity simply because it was there.
In the above example, $200,000 of usable equity remains in the primary residence for future investment purchases.
Alternatively you may choose to cross-secure the loans across both properties. While this can sometimes simplify the initial transaction, it can also reduce your flexibility when you want to access equity, refinance or purchase additional properties later.
The exact structure will depend on the borrower’s circumstances, the properties involved and the lender.
What matters is understanding that using equity is a borrowing strategy, not simply a withdrawal of wealth from your property.
That’s an important distinction. Rather than simply asking:
“How much equity do I have?”
You’re asking:
“How much additional debt am I comfortable taking on, and how might that help fund what I want to do?”
Business owners may have more than one source of funds
For business owners, there’s another layer to consider.
You may have accumulated cash within your business. You may also have substantial equity in your home or existing investment properties, or you may have both.
It can be tempting to look at the business bank account and think:
“There’s my deposit.”
But taking money out of a business can have taxation, cash-flow and other consequences.
Those consequences need to be considered with your accountant.
The same applies to the ownership structure of an investment property. How an investment should be owned and the taxation implications of that structure are important decisions.
Our role is to work with the strategy you and your accountant have determined and then look at the finance.
That might include assessing available equity, the additional borrowing required, your borrowing capacity and which lenders are likely to suit your circumstances.
For a business owner, that can be particularly important because lenders don’t all assess business income and business commitments in the same way. Our previous article “Most Business Owners Prepare to Buy a Property. Very Few Prepare to Apply for the Finance ” addresses this.
What about the 2026 property tax changes?
The Federal Government announced significant changes to the taxation of residential property investment in the May 2026 Budget.
From 1 July 2027, negative gearing for residential property will be generally limited to new builds. Properties held before 7:30pm AEST on 12 May 2026 are exempt from these changes. For established residential properties acquired after that time, losses will generally only be deductible against income from residential property, including capital gains, with excess losses able to be carried forward.
The Government has also announced changes to Capital Gains Tax from 1 July 2027. The existing 50% CGT discount for individuals, trusts and partnerships will be replaced by cost-base indexation, together with a minimum 30% tax rate on real capital gains. Transitional arrangements apply, and different arrangements are available for eligible new residential properties.
These are significant changes and their application will depend on the property and the investor’s individual circumstances.
That’s where professional tax advice becomes important.
Before deciding how a proposed investment should be owned or assessing the tax consequences of purchasing it, we would encourage you to speak with your accountant or tax adviser.
Our role is then to work with the strategy you’ve agreed and help determine how the purchase can be financed.
So, what does your equity actually give you?
If you’ve owned property in WA for several years, its increase in value may have created an opportunity that didn’t exist before.
The first step is understanding what that opportunity actually looks like.
How much is your property worth today?
How much do you currently owe?
How much usable equity might be available?
And then comes the question that can ultimately determine whether you can make the next purchase:
What’s your borrowing capacity?
Once you understand your equity position, you can continue researching the property market with a much clearer picture of the financial resources potentially available to you.
But having the deposit is only part of the equation.
In Part 2 of our Building a Property Portfolio series, we’ll look at why borrowing capacity can become more challenging as a property portfolio grows.
