5 Helpful Tips to put your Money to Work:
The whole point of investing in property is to create lasting financial security.
So why does it often seem like you have to spend a lot of money in order to make any as a landlord?
Investing in real estate is a costly business but there are plenty of strategies you can use to maximise your money and ensure your dollars are working as hard for you as possible.
1. Opt for interest-only loans
An interest-only loan is usually the best option when you’re starting out as an investor because it allows you to maximise your borrowing power while you’re working your way up.
2. Don’t use the same lender for every property
When building your investment property portfolio, it’s a good idea to try and use a different lender for each property you own.
There are many reasons for this, but the biggest one is avoiding the consequences of cross-collateralising your assets.
3. Take advantage of depreciation
Whilst not strictly a finance tip, this does relate to effective money management.
To increase your tax deductions as an investor, you need to take advantage of depreciation deductions.
Depreciation is reimbursement for the inevitable deterioration of an investment property.
4. Consider using Lender’s Mortgage Insurance
Do you realise you can still buy a property with only a 5 or 10% deposit?
This means you need less of your own money to be able to buy your property sooner, but you’ll have to buy the right type of property in a location the banks feel will be likely to deliver capital growth and you will need to take out Lender’s Mortgage Insurance (LMI).
5. Set up buffer accounts to cover property costs
As a landlord you will experience bumps in the road: whether it’s the air conditioning system that fails, the bathroom that floods or the oven that desperately needs to be replaced, there will be unexpected expenses that crop up!
To avoid being stressed out (and financially stressed) by these expenses, I suggest you set up a property ‘buffer’ account with enough savings to get you through unexpected expenses.