Whether your investment properties are positively geared and you’re enjoying consistent cash flow or you’re looking to use the long-term capital growth in your property to propel your wealth-building, there are a few important things you must know as a property investor.
If you’re not aware of these things, you could find yourself with unexpected problems and expenses that can impact your investments. Keep reading so you don’t get any nasty surprises throughout your investment journey.
1. Landlord’s insurance is a very smart investment
Your investment property is likely one of your most valuable assets, so it makes sense to protect it. While landlord’s insurance isn’t compulsory, it is a good idea to take out a policy that covers you for things such as damage caused by water leaks, plumbing issues, and if a renter deliberately damages your property. Some policies will also cover you for lost rental income if your renter vacates unexpectedly or stops paying rent.
2. Budget for ongoing costs when you buy
Sure, you’ve probably worked out your mortgage repayments and secured pre-approval for a loan, but have you factored in the ongoing costs of having an investment property? Make sure you budget for expenses such as land tax, council rates, water bills (where applicable), and strata or owner’s corporation fees for townhouses and apartments. There’s also those unexpected maintenance issues that arise from time to time, having a nest egg for these can save you from so much unwanted stress.
3. Keep up to date with regulation changes
Renter legislation is constantly changing across jurisdictions. And with the proportion of renters in the community increasing, there’s a general trend for legislation changes to be more accommodative of renters. For example, in Victoria, property owners may not be able to refuse a renter’s right to have pets at their property. With changes like this becoming commonplace, it’s now even more important to secure great renters who will not only look after your investment but make sure any four-legged family members don’t damage your property.
4. Make sure your property is safe
Fire alarm legislation is another area constantly changing. Your property manager will keep you updated on these and similar changes. However, you should make sure you always have funds set aside for compliance activities, such as upgrading your fire alarms if required. Having an investment property is rewarding in so many ways, but you need to make sure you’re aware of your upfront and ongoing costs and potential risks. Factor in the items above for your current properties and future purchases to proactively manage your expenses, address problems and stay on track with your wealth-building goals.
Remember, this article does not constitute financial or legal advice. Please consult your professional financial and legal advisors before making any decisions for yourself.