Buying and selling real estate is a favourite past time of many Australians. Statistics indicate that 2 in 3 Australians will at some stage in their lives be property owners. Becoming a property owner in the aftermath of the recent property boom is not a simple task. Despite this, property millionaires are coming out of the woodwork talking about financial independence through real-estate. Regular mums and dads on average salaries have come forth with multi-million property portfolios, owning not just one or two but a dozen or more properties.

The truth is that you do not need to be a financial wiz to be successful with real-estate. It does however help to know the basic concepts.

Home Sweet Home

The concept of your own home is rarely associated with investment. Your home is a roof over the head of your family. It is a place to get away from it all, to feel safe and secure. Most of us choose a home for comfort, looks, design but rarely for capital appreciation. In Australia, approximately one in three homes are rented. So why do some people buy several properties while others buy none. The reasons are rarely to do with income and financial opportunity but are more to do with understanding how property investment works.

Australians who understand that a home is more than a place to live, buy in areas where they expect to achieve better capital appreciation over time. They then use the accumulated growth in the value of their property (equity) as security for further real estate investment.

Available Equity

Equity is the difference between what your home is worth and the amount of your mortgage. If your home is worth $400,000 and you have an outstanding mortgage of $ 250,000, then your home equity is $150,000.

Most people who have been in their home for a number of years would have accumulated a reasonable amount of equity either due to the growth in the property market or through the repayment of their mortgage.

Your available home equity is your available investment capital. Many successful investors started off by using the equity in their own home for deposits on future real estate acquisition. Your equity can be accessed through a line of credit or a home equity loan. Depending on the amount of available equity you may be able to purchase more than one property or even top up mortgage repayments from available equity.

How Does Gearing Work?

One of the strongest arguments in favour of real estate investment is gearing. Lenders will make more funds available for investment in property than in any other type of investment including shares