Urgent maintenance is an unavoidable aspect of being a landlord, so having a cash buffer set aside will help you deal with any unexpected problems.
When renting out an investment property, having access to extra cash is vital for two reasons:
- to cover the costs of maintaining the property, giving it the best chance of remaining tenanted; and
- to cover the cost of the mortgage should you lose your employment or rental income
“A buffer ensures that you are not stretched to your financial limits, but rather comfortable while on your investment journey,” advises a finance broker.
Ideally, your buffer would sit in an offset account against your mortgage, so that you have immediate access to the money while at the same time reducing the principal, and therefore the total interest payable on, your loan.
“Before calculating a buffer, I ensure my clients have a budget and savings plan in place that identifies their accurate living expenses and ability to save,” the broker says. “I would personally recommend a buffer of three to six months’ worth of loan repayments and living expenses.”
For those who find themselves needing to improve a property without a buffer, there are short-term options available. Personal loans and credit cards may cater to urgent funding, but they do attract higher interest rates and fees.
“It’s imperative to have a strategy in place to pay back this debt as soon as possible,” advises the finance broker. “An example could be to refinance your property and draw down equity to pay back the loan, but ensure that you revisit your buffer strategy as well.”
If you would like assistance getting your accounts under control as we approach the end of financial year, call us today on 1300 79 80 38.
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At Assure Wealth we specialise in helping busy, successful families structure their finances to achieve greater wealth and financial peace of mind.
Author: Pat Casey – Managing Director & Financial Planner Sydney – Assure Wealth
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Disclaimer: The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Walker Lane Pty Ltd Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Walker Lane nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.
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