Knowing how to plan for and cope with property investment issues is a critical part of any investor’s tactical armoury, and built into their considerations within their property plan
Considering and producing a detailed risk analysis includes understanding and listing as many potential property investment issues as possible, and determining in advance how you will deal with those challenges if and when they come up. This allows a property investor to cope with a crisis in the most considered and effective way possible.
In an ideal world, your property would be fully tenanted, easy to manage and continue to grow in value year on year. The reality is that there are a range of issues that can crop up – and professional property investors realise that the likelihood of at least one of these events occurring is very high – during the life-cycle of your business.
Some typical property investment issues include:
- Sudden interest rate rises adding financial pressure
- Tenants damaging the property, not paying rent, or causing issues with the neighbours and community
- Property not rented and not collecting rent
- Personal problems causing changes in circumstances
- Structural issues requiring urgent or expensive repairs
- Losing employment and affordability problems
- Property managers not managing the property professionally
A turn in the economy causing property values or rental opportunities to drop – with the potential of leaving you with a negative equity situation
Property investment is all about managing risk – planning well, understanding what you can afford, building the right property team, using the right data to determine where you buy and at what price – and managing the investment through its life-cycle sensibly and professionally. These attributes are what set up property investors for success.
Avoiding hasty decisions, property spruikers, get rich quick ‘opportunities’ like buying into volatile mining town or an ill-considered development – mistakes that too many people make – and can lead to financial catastrophe.
Even with your due diligence done, problems and issues will arise at some point. How prepared you are and how you react, can make or break your property investment career
In a previous article, we wrote about the importance and usefulness of good quality Landlord Insurance – which will help if you come across bad tenants who damage the property or don’t pay their rent.
Let’s look at another common scenario and how we could plan for it, and manage it if it eventuated:
Losing your job
One of the great fears for people with financial commitments is losing their key source of income – and sometimes losing your job is an eventuality that you can’t predict.
So what are the considerations for you as property investor around how to plan for and deal with this eventuality?
- As part of your planning, and depending on your circumstances, you would ensure you had a buffer to support you through a financial difficulty – at least three months expenses is the minimum recommended
- Sensible planning would include Income Protection Insurance and Total Permanent Disability Insurance
- Check any allowances owed by the employer are paid – such as holiday, long service and superannuation
- Seek any relevant Government assistance such as Centrelink that you may be entitled to
- Speak with your mortgage provider about the chance to take a mortgage holiday
- Review your property portfolio and consider how you can re-negotiate terms for example to an interest only mortgage repayment
- While looking for work, look for other opportunities to make an income
So by listing the potential property investment issues, and having a plan in place to manage each scenario, you will significantly reduce the chance of both making a poor investment decision in the first place, and in avoiding a catastrophe if one of those scenarios eventuates
The importance of a professional property plan and the right property team cannot be under-estimated when it comes to what are usually the largest financial investments you ever make. When coping with property investment issues, shrewd investors will be adequately prepared for almost any scenario, in order to ride out the storm and minimise both financial and personal stress.
Adviseable are a small and close-knit team of completely independent property advisers, buyers and negotiators. We work one-on-one with our clients to professionally support them towards achieving their property investment goals. Feel free to give us a call for a chat to see how we can best help you.