First up, sounds like you've got a house, decent equity and a baby on the way... what a triple threat! I mean it, there are few people who have been able to get all three so no doubt you've had to work hard or make tradeoff's to get there. Well done.

Now, I am going to assume this $150k is not the total equity you got in the house? But additional equity beyond 20% of the value of the property. Am I right? Because remember, it's not likely a bank will let you take out all the equity to do something with (although this isn't exactly my area of expertise, so go and chat with a mortgage broker on this).

Some things to think about before we get into each option... Income pressures, stress and concentration risk (this isn't exactly a good triple threat, but could very much be a threat to your wallet, sanity and wealth if not considered correctly ahead of time!).

Some questions to ponder/discuss with your partner:

- What will household income look like for the 'newborn' period? Can you live on that comfortably with your current expenses?

- What will expenses look like when you factor in childcare, baby ongoing costs and a potential new mortgage shortfall? Don't make this aspirational, be a bit doomsday here and over inflate the costs so you know you could 100% handle them if rates where to rise or you had an unexpected bill or situation (like a vacant property) land on your lap.

- Do a little pie chart of your current assets, with each wedge a different colour representing your different assets (cash, super, total equity in property etc)... then think about how diversified or concentrated your assets are currently. It's a good way to step back and make sure you've got a good sense of your current position.

- Chat to your mortgage broker about what having a child would do to your borrowing capacity. Sure, it may mean you can borrow more now ahead of it's arrival, but there is a reason for that. The banks know there is an income and expenses impact for most people, and they don't want you in hot water and not able to make repayments.

So whilst it might be a strategic idea/option to do it before baby arrives, you reeeeally want to make sure you can actually handle it and don't have to fire sell as asset because your numbers are in a deficit every month and you can no longer afford to hold both.

Some more succinct thoughts from me on each category:

Investment Property:

You've heard my thoughts up the top about getting across the expenses in this scenario.

Core Logic came out with some recent data that suggests to me that most people are up to their eyeballs in mortgage debt. So it's highly likely your going to be negatively geared (get your debt structured correctly if you do this option so you're making sure you are being as tax effective as possible).

Leverage: Cool - sounds like you got equity could be used as a deposit for an investment property. How are you going to structure the debt? Get help and advice here.

Rental Income: If you’re able to secure a good rental yield (which is rare tbh given property prices) then that will help cover costs. But it's not just the mortgage you need to think about. What about all the running costs of the property? Maintenance, strata, rates, property management costs? Also make sure you've got a buffer for vacancies or unexpected costs.

Capital Growth: If property values in your target area rise, you could benefit from significant capital gains over time. Most people tend to buy in areas where they already know (or live), if it's growth you're after then take your blinkers off and get clinical looking at other areas that could be suitable. Also helps with micro-climate property risks.

Costs & Time: An investment property will come with ongoing costs—maintenance, property management, and more. Plus, as new parents, you’ll have less free time to deal with those day-to-day property issues.

Debt Recycling/Investing: Debt recycling, on the other hand, could be a smart way to turn your non-deductible home loan debt into deductible investment debt by gradually investing while paying down your mortgage. I feel like this topic needs it's very own money dilemma to cover off the basics, so if you're interested in that let me know and I will add it to the list.

Diversification: Instead of putting all your eggs in the property basket, it may make more sense to invest in shares, ETF's or other assets, spreading your risk and potentially providing more liquidity than property. It also means you could sell a smaller parcel if you ever felt like you really needed some additional funds (my general stance is investing should be for the long term but it's much easier to sell these than try and sell a bathroom).

So, what’s the right move?

There’s no one-size-fits-all answer. Derrrrrrr (if you're new here, this is always the answer when it's a General Advice style answer). It depends on your comfort level with risk, how hands-on you want to be with an investment, and whether you prefer the idea of growing wealth through property or shares.

Whatever you choose, just know there’s no rush. You’ve already set a great foundation by building that equity, so take your time, weigh your options, and make the choice that aligns with your growing family’s goals and lifestyle.

Good luck with the next steps—and the new baby! 👶✨

Jess

Have a money dilemma?

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Obvs all of this is general advice only... especially important to note any and all of the comments above do not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs.