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.
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. 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, 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 have any other questions feel free to give us a call on 0487 344 352.
Disclaimer: The Information is general in nature and does not take into account your particular investment objectives or financial situation. It does not constitute, and should not be relied on as, financial or investment advice or recommendations (expressed or implied) and is not an invitation to take up securities or other financial products or services. No decision should be made on the basis of the information without first seeking expert financial advice. Your full financial needs and requirements would need to be assessed prior to any offer or acceptance of a loan product. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.