The Property Investment Lifeline
2019 is shaping up to be a rocky year for property investment if you’re unprepared. This article will help you to ride the storm that this new year could bring and provide a common-sense approach to keeping your property ship-shape for many years to come.
Are you psychic? Do you have a DeLorean that can drive you back to the future? Awesome – I’ll grab those lotto numbers ;) …If like me, you don’t, you’re property investment is going to need some extra cash behind it. Life is full of unexpected twists and turns, having extra savings is always important but as a property investor it’s vital. Urgent maintenance can’t be avoided and so having a buffer can keep you out of a lot of trouble.
Possible lifeline uses:
· To give your property the best chance of remaining rented, keep your place looking great and in perfect working order,
· To cover the mortgage if anything was to happen to you or your job, (insurance doesn’t always kick in straight away or last over the period you need it to),
· To cover any monies lost if something happens to your tenant, (like if they lose their job or stop paying you for any reason).
This is also about being able to live comfortably without being stretched to your financial limits. Your investment journey should be enjoyable and as stress free as possible. This extra cash will allow for peace of mind – which can never be underestimated.
A good place to store this emergency cash would be in an offset account against your mortgage. This way you have immediate access, whilst simultaneously reducing the principal and total interest payable on your loan.
So, how much should you put aside? Before calculating this, talk to your advisor about your budget and savings plan. This way you can identify your accurate ability to save. I would personally recommend your safety net to have three – six months mortgage repayments and living expenses.
If the worst comes to the worst and for unforeseen reasons you need to improve a property without your safety net in place, there are still options open to you. Ideally you wouldn’t want a personal loan or credit card debt in this situation, (although these could be used as a short-term option). The smarter option would be to have a strategy in place, without the higher interest/ repayment rates. One example of this could be to refinance your property and drawdown the equity to pay back the loan. However, information is always power, so speak to your advisor before making any decision.
If you’re making the exciting life-step of becoming a new investment property owner, or you already own an investment property and you’re concerned about the future, we hope you’ve found some security in this advice. Our blog is all about empowering you to make the right choices. We all need to become the captains of our financial destiny and by creating this lifeline, we could all sleep better this year… no matter how rough this sea gets!
If you need any more advice or information, don’t hesitate to contact Bear Loans today, we’d love to help.
*This information is not to be relied upon without speaking to your finance broker, tax agent or financial adviser.