How to structure property finance for growth

For Suvidh Arora, creating wealth with property is about the structures you have in place – and that includes both support networks and sound finance strategies.

When faced with major changes in property, whether it’s increasing interest rates or decreasing property values, solid investments structures will ensure you can optimise your capacity and minimise your costs.

With 15 years of finance, strategy and wealth creation experience, Suvidh Arora joined KnowHow founder Bushy Martin on the Get Invested podcast to provide insight on how property investors can optimise their approach.

Why debt can be a good thing for property investors

Suvidh said many investors have the wrong mindset towards debt, which leads to costly mistakes.

“Interest rates will go up and down. But if you’ve got a solid strategy in place, you will ride through that. And that’s where structuring in the right way helps you achieve that,” Suvidh said.

“One of the mistakes made is just thinking that debt is a bad thing. I personally believe debt is good as long as you use it to leverage and get to your goals quickly. Yes, the loan on your owner occupied property is going up, but it’s still tax deductible. And people just don’t realise that.

“So a mindset shift is required in that, yes, the debt is going up, but it’s also helping me create a portfolio which is then going to have a multiplying effect. And suddenly, five or ten years down the line, it enables me to just pay off that home loan in one go, and then I become absolutely debt free as far as that is concerned. And then all I have is good debt.”

Therefore, investors are encouraged not to wait for a debt to be erased before putting money into a property.

“A lot of people try to pay off their owner occupied loans straightaway and then start thinking about property (investment). But by that time, the property market has shifted so much and you’ve lost out of all that opportunity that you could gotten by structuring your loan,” Suvidh said.

“So it’s that cycle I spoke about that people realise very late. And people also don’t think about the fact that your first owner occupied home is not always your forever home. So, paying it down straight away might not be the best strategy, especially if you’re going to make it an investment property in the future.”

Why it is important for property investors to leverage money

Suvidh and Bushy advised investors to use different strategies to leverage money from the bank in the right way to ensure the property is working for you, not the other way around.

“A lot of the time with most of our clients, when they come to buy a property, we try not to have given a single dollar going out of their savings account as a contribution towards buying some property, because we try to leverage money as much as possible,” Suvidh said.

Bushy added: “if you go invest in property and it’s going to dip into salary savings or hamstring your lifestyle, then you’re not likely to be doing it for very long. So you’ve structured things in such a way that the property is pretty much looking out for itself, then you’re more likely to go the distance, last 15+ years, and it’s going to give you all of the rewards that you’re looking for.”

Investing in a positive support structure

The energy and motivation of the people you’re surrounded by can be defining in your investment journey.

“I’ve always invested deeply in myself. And it might sound cliche, but there are times when self-doubt creeps in, there are times when other people pull you down, and there are times when you start thinking you’re not good enough. That’s when you start investing even more in yourself and have that support structure and positive people who will help you come out of difficult situations,” Suvidh said.

“A lot of the time people make the mistake of just thinking, ‘I’ll do it and see what happens’. But if you’ve got the right strategists around you – whether it comes from finding the property in a good location, or helping you with the finance side, or helping with the taxation side and structuring of it all – each and every part of the equation is important. And apart from self-educating and knowing what you are and what you’re trying to achieve, it’s very important to have those people around you that will guide in the right direction and help you achieve your goals faster.

“Everyone can achieve, that’s not a problem. It’s about how quickly and efficiently you can get there, and that’s where having great support structures becomes very important.”

Listen to the full interview here.

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