We Australians are generally an optimistic bunch which makes this a great place to be on so many levels, but sometimes it’s good to spend a little extra and cover our tracks.
Buying an investment property is hugely exciting and when done properly, it is without doubt, one of the best ways to build wealth. However, to get to that fantastic, long-term capital growth you need to ensure that you can hang onto your property year-on-year and to do that you need to insure yourself.
While your salary is coming in and your fabulous tenant is paying their rent on time, all runs smoothly but what if you lose your job or get sick? Or if your fabulous tenant suddenly decides not to pay the rent? Or they lose their job?
No one really likes to focus on the “what if’s” but in some instances it’s the wise who do. Securing an investment property is one of those times – especially as statistics show that, on average, Australians are one of the most underinsured nations in the developed world.
Here three ways to make your investment property as fail proof as possible:
- Landlord Insurance
- · Accidents
- · Malicious Damage
- · Theft
- · Prevention of access
- · Tenant hardship (when they can’t pay the rent)
- · Runaway tenants
There are many different products and policies on the market for you to research but in short, Landlord Insurance will protect you from tenant mishaps such as:
- Income Protection
Income Protection does exactly what it says – it will protect up to 75% of your income if you are unable to work through illness or disability, ensuring your mortgages can be met.
It’s also a tax deductible expense and a good Financial Planner will find you a policy that meets your individual needs.
A buffer comes under many different names but is simply a lump sum of money, kept in the properties off-set mortgage account, for emergencies or cash flow purposes. By having $5,000, $10,000, $20,000 or even a $100,000 set aside, no matter where life takes at you, you’ll be able to sleep well at night knowing you have enough money to tide you over until you get better, get another job or simply come back from that extended holiday!
There are a few different ways of funding a buffer and a good Mortgage Broker will go through your options. One of the most common is to draw equity down on your investment property or family home and have it sitting in cash as opposed to being tied up in bricks and mortar.
No matter how meandering and varied your property investment path is, taking these few, simple steps will ensure that you’re always ahead of the game.
For more information on Financial Planners, Mortgage Brokers or how to create your buffer, call Elaine on 0412 362 133.