Investing for your future is something that is becoming far more important these days. Ensuring you have a comfortable retirement and maintain the lifestyle, you have become use too.
One of the most popular financial investments is property. Not only can you gain capital growth, you are also going to receive a direct income stream. Sounds very appealing doesn’t it?
With the progression of inflation, your property is likely to go up in value and rents are likely to go up as well. This means that over time your cash flow improves as you are collecting more rent as your mortgage declines or stays the same.
As appealing as it sounds however, a few important factors should be considered before you purchase a rental property. One of the most important questions is; do you have enough money aside for repairs, maintenance, a bad rent payer or an unoccupied home?
When something needs repair or maintenance on your own home, you may be prepared to wait until you have saved the money to have it fixed, but a tenant will not. It is essential to attend to these matters as soon as they arise as you have a duty of care to your tenants.
This may play a role in the type of property you wish to purchase as an investment. Do you want the added responsibility of maintaining a pool? Do you want a property that you can see will need re-decorating soon? Are the appliances in good condition? With this in mind, a thorough ‘Pest & Building’ report when purchasing is crucial. Body corporate fees may also be something you need to take into consideration.
A good tenant is every Landlords dream so having a property that is well maintained and cared for is going to be far more appealing to the astute tenant. Being a conscientious owner is also a great way to keep a good tenant happy.
You may be lucky enough to have a well-paying tenant for years and years but unfortunately, it is not always the case. Tenants are not always guaranteed to pay their rent on time. You will need to be able to service the properties mortgage if you find yourself in this position. You may also lose your rental income in-between tenancies, so please consider this too.
Some tenants will also cause more property ‘wear and tear’ than others may and at the end of their tenancy, these issues will have to be rectified.
Additional ongoing and additional costs can also come into play. Insurance costs, council rates, management fees and possibly interest rate increases. These extra and ongoing costs may be regular or may come as a surprise when you least expect it.
To maximise the best possible financial outcome, choose the location of your investment property wisely. Gather good advice from local real estate agents in regards to rental returns and good growth areas. Have a good look at the amenities, public transport, local schools and day care centres available in the area you wish to purchase.
These are all considerations for tenants when looking for a home. It may also have a bearing on the type of tenant you wish to attract. Families, students, couples etc.
How do you feel about having pets in your investment property? This question will definitely come up. In all reality, most people have a domestic pet so it pays to be flexible on this, but ultimately it will always be your decision at the end of the day.
A good Property Manager can remove a lot of stress from being a Landlord, so choose wisely. Find someone you feel is easy to communicate with and will provide thorough feedback regarding any of your tenancies. It is also their job to ensure that rent is paid on time and any rent arrears are chased up. Interviewing a few Property Managers to find the right fit is well worth the time.
With careful planning and the right investment, you could land a property where the rental income outweighs all of these expenses and still puts money into your pocket.
By Claire Hester.
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