The Power of Leverage

Property investment has many benefits, but perhaps the biggest of them all is the ability to leverage your money.

Leverage is one of the most powerful and misunderstood tools in property investment.

At its core, leverage is about using borrowed money to grow your wealth faster than you could with just your own savings. It’s one of Thrive’s five key investment principles because, when applied correctly, it can significantly accelerate portfolio growth.

Let’s break down how leverage works in practice, how to qualify for it, and how you can use it responsibly to build long-term wealth.

What Is Leverage in Property Investment?

In plain English, leverage means using the bank’s money to make money for yourself. You put in a deposit (your equity), borrow the rest from a lender, and buy a property.

As that property increases in value, you earn capital gains on the full value, not just the portion you paid for.

Let’s say you invest $100,000 of your own money into a $500,000 property (borrowing the other $400,000).

If that property rises 10% in value, you now have a $50,000 gain, a 50% return on your cash.

That’s the power of leverage.

But access to leverage isn’t guaranteed. Banks want to know three key things before they lend you money:

• Character
  

• Security
  

• Serviceability

  
  

1. Character - Can You Be Trusted With Debt?

The “character” assessment is the bank’s way of determining whether you’re a reliable borrower. This includes your credit history, repayment record, and how well you’ve managed money in the past.

• Do you pay your bills on time?
  

• Have you defaulted on loans?
  

• Do you have stable income and expenses?
  

For most investors, especially those with consistent income and clean financial records, character is not a major hurdle. But if you have a patchy credit history or high unsecured debt, it could limit your leverage potential.

2. Security - What Are You Offering the Bank?

In property investment, security refers to the asset the bank is lending against.

The bank needs to feel confident that if you default, they can sell the property and recover their funds.

Loan-to-value ratio (LVR) rules are key here:

• Owner-occupied homes: Typically up to 80% LVR
  

• Investment properties: Usually 70% LVR (unless new builds)
  

To work out the equity you have available in your property (useable equity), the banks apply a simple formula:

(Value of your home * 80%) - Mortgage balance

Let's say you owned a property worth $1m, and you had a $400k mortgage. Useable equity:

(1,000,000*80%) - $400,000 = $400,000

So, if you own a home worth $1 million and have a $400,000 mortgage, you potentially have $400,000 of usable equity to leverage into new purchases, assuming you meet serviceability requirements.

Note: Banks usually don’t accept unconventional dwellings like tiny homes or leasehold apartments as security because they’re harder to resell and carry more risk.

Strategic lending across multiple banks or splitting security can also be useful to optimise leverage while managing risk, but this requires expert advice to avoid cross-collateralisation traps.

3. Serviceability – Can You Afford the Mortgage?

Here’s where many investors get stuck. Serviceability is your ability to repay the mortgage under the bank’s test conditions, which are often more conservative than real-world expenses.

Banks use a stress-tested interest rate, often 7–8%, and only count a portion of your rental income (e.g., 75%) to ensure you could still afford repayments if rates rise or the property is vacant.

This is why yield vs. growth matters so much. A high-yield property like a dual-key apartment might not grow as fast, but it improves your income position and, therefore, your borrowing capacity.

Tip: Balancing growth-focused assets (capital gains) with yield-focused assets (cashflow) gives you more flexibility to expand your portfolio.

Equity and the Power of Reuse

Equity is the difference between your property's market value and the outstanding mortgage. Over time, as your properties increase in value or you pay down debt, your usable equity grows.

If that equity is just sitting there, it’s effectively “dead money.” Leverage allows you to put that dormant value to work by drawing it out to fund new purchases, without needing to sell.

The magic of this strategy? When your leveraged properties go up in value, you keep all the gains, even though you only contributed a fraction of the capital.

The Hidden Key to Growth: Time

Leverage doesn’t require you to renovate, flip, or get fancy. Most investors build wealth by holding good assets over time. Capital gains accrue naturally, equity grows, and leverage builds on itself.

Final Thoughts

Leverage isn’t about gambling, it’s about amplifying smart decisions.

By understanding how banks assess borrowers and structuring your portfolio around character, security, and serviceability, you can unlock the true power of leverage and grow your property portfolio faster and more sustainably.

Ready to put your equity to work? Then leverage might just be your best friend in this game.

---

How Can We Help You?

We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.

What Does This Look Like?

We use a 3-step process:

1. We start with a Discovery Meeting where we learn about you, your goals, etc., and you learn more about us.

2. This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts, and briefly touch on some investment choices.

3. Finally, an Asset Selection Meeting where we discuss investment options in more detail and make any recommended adjustments based on what we now know about you.

Who Are We Right For?

We help people make smart investment choices and set up their futures. From first-time investors to experienced investors, we can cater to a wide range of people and help set up their futures through research-based property investment.

How Much Does It Cost?

Our advice is free to you! If you choose to invest, we’re paid by the property developer. This developer-paid model allows us to provide no-obligation property investment advice in New Zealand, without charging clients directly.

What Do We Do, And What Don't We Do?

What We Do

We offer end-to-end New Zealand property investment advice, helping Kiwi investors grow wealth through smart, data-led decisions. Our focus is on quality new builds in strong locations, tailored to your goals, guided by a team that knows the NZ market inside out.What We Don’t Do

We don’t do KiwiSaver, shares, cryptocurrency, or broad financial planning. Thrive is not a generalist firm. We specialise in property investment in New Zealand because that’s where we deliver the most value. By staying focused, we cut through the noise and help our clients make confident, well-informed property investment decisions.

How Do I Start?

Start the process now by booking a time to talk with our advisor by clicking here.