One of the most painful things for an investor’s cash flow is the loss of tenants without being able to replenish them quickly. In order to protect your assets against this kind of liability, you need to stay competitive, but not greedy. Don’t be tempted to increase your rent above the market rate and ensure your property is maintained well and hosts features and functionality expected by modern tenants.
On top of this, your property manager is a great research that can provide you with everything you need to know about the market, as well as when to increase your rent and how much by.
In addition, you can help protect your assets in the future by getting recommendations from your property manager on what renovations and property jobs should be carried out over the next 3 years. From this, you’ll be able to create a schedule of works to keep your property competitive in your local market.
Certain property enhancements, such as kitchen renovations, outside area maintenance and adding a garage will undoubtedly help you to achieve this, but they’ll also take up a significant chunk of your budget. It’s for this reason that your 3-year plan is important. Alongside this, your property manager should be able to give you a basic guide detailing the payback you can expect to receive in terms of rental increases.
Are Your Assets Optimally Insured and Structured?
An investment property can leave many of us feeling financially secure, but the structure and insurance are essential to avoiding any potential issues.
It’s common for investors to fail to take out the proper insurance or gain the full benefits their property affords them. Without these protections in place, you take on the risk of losing everything in the event of a fire or storm. As a result, cutting corners on insurance isn’t a great idea.
Creating the right structure when buying an investment property is essential, and it’s important that you seek professional advice from any property managers and financial planners you’re working with. They’ll be able to take a look at your overall situation and give you advice on the best way to move forward.
What Different Structures are Available?
If you’re considering real estate assets additional to your own home, it’s wise to keep them separate. This will mean that, in the event of any mortgage arrears, claims will only be valid against that single property, not your family home.
There are 3 main ways you can do this when buying a property:
1) Buy it in your own name
2) Buy it in the name of a company
3) Buy it as part of a trust
Buying in your own name will allow you to negatively gear your investment and reduce your tax liability. It will, however, provide you little protection against potential future lawsuits.
If you buy your investment property in the name of a company, the liability will remain with that company. This means that any shareholders are protected against banks seizing any personal assets that may have to their names.
Buying in the name of a trust can be complicated, but since it’ll be in your name, you’ll still be able to negatively gear it.
Seek Professional Advice
As with any property decision, it’s highly advisable that you get professional advice. The decisions you make as to the structure at the start of your investment can have a heavy toll on the results and liabilities you see down the line.