By Ben York
Rental Services Manager
Stockdale & Leggo
Koo Wee Rup – Phillip Island – Hastings

THERE is no doubting the fact property investment can be the vehicle that allows many people to build wealth long-term, but there is also no getting around the fact that it can come with some risks, so let’s talk about how to mitigate some of them.

Vacancy of your rental property can be a huge risk to your overall financial health if you are relying solely on the rental income to service the mortgage on the property, even more so if the vacancy lasts for an extended period.

So, there are two parts to mitigating this particular risk, part one involves your initial property selection, by finding an in-demand property type in an in-demand area (one with low vacancy rates) you will have avoided the biggest potential cause of long-term vacancy.

The second part involves building a financial buffer, think of this like insurance, so that you can withstand some short-term volatility in your rental income such as in-between tenancies or when major maintenance expenses occur.

Several mortgage providers offer “Mortgage offset” account types which can be a handy place to keep your financial “dry powder” or a redraw facility may work better for you.

Wherever you decide to keep the money, the message is the same, try to keep enough cash accessible that a minor disruption in monthly rental income wouldn’t cause financial hardship.

Damage caused by a tenant can be the worst nightmare for many landlords but there are also strategies you can employ to mitigate this risk. Firstly, it’s important to remember that things can always be fixed but you’d rather not have to, so as a landlord it’s important to deal with a property manager you trust to lease your property and to fully vet all applicants.

Also worth mentioning here that keeping up with the maintenance on the property sends a message to the tenant that you care about the state of the property, conversely, delaying or denying maintenance has the potential to send the opposite message and leave the tenant wondering “If the landlord doesn’t care about the property, why should I?”

Even after your property manager has found the prospective tenant you both think will be an excellent fit for the property, we need to remember that “life happens” and people’s circumstances can change, sometimes drastically. We are dealing with people after all!

Enter Landlord’s Insurance, no not the same thing as having the building insured, rather a specific policy for landlords which covers the likes of malicious damage, rent arrears and loss of income. While these policies provide a great peace of mind, we also need to remember that if there is an issue worth claiming for, we first need to have the issue resolved to have the financial calculation of the value of the claim. This can leave the landlord temporarily out-of-pocket until the claim is finalised, yet another reason to have the financial buffer we discussed earlier.

To learn more about how to make your investment property work for you, call Ben York at Stockdale & Leggo today on 0477 771 551.