This is how to optimise the use of your borrowing capacityOct 04, 2019
The amount of mortgage debt that you can carry these days is likely to be constrained to an approximate ratio of your total income.
Given that this is now the case, it’s more important than ever to optimise the use of your borrowing capacity rather than wasting any of it with dud assets.
How, then, to get the best bang for your bucks?
The one thing you can never change about a property is its location – it is forever fixed in place – so what must come first is finding a quality location, walkable to all key amenities, and with strong connectivity to one of the major employment hubs.
The second thing to look for is a high and growing land value, and ideally a land-to-asset ratio of at least 50%, or preferably higher.
Over the full life of an investment it is the appreciation in the land value that will do the bulk of the heavy lifting for you.
And thirdly, if you can find a property with an extra dimension whereby you can add further value to it later, then this makes for the best of all worlds.
I discussed this a little further in the short video here
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