Whether you’re taking things one step at a time or are building your portfolio, investing in property has the potential to secure your financial future. But that’s not to say it won’t cost you along the way - because aside from the hefty home loan deposit you’ll have to cough up, there are a number of expenses you’ll also need to budget for, from building inspections to council rates.
But don’t let that scare you off from taking your first step onto the property ladder, especially when there are a few tips and tricks floating around that can help investors save.
Give yourself peace of mind
If there’s one thing you want to minimise as a property investor, it’s financial headaches brought on by busted pipes or broken glass. Having landlord insurance can help give you peace of mind for when things go wrong and won’t leave you out of pocket if your property suffers damage. Although you will have to pay the premium upfront, it could save you a bundle down the track.
Of course, we’re sure we don’t have to stress the importance of taking out landlord insurance, but how do you know when a policy ticks all the boxes? Don’t worry, we’ve got it covered (literally).
We recently held our annual Mozo Experts Choice Awards for Home, Contents and Landlord Insurance where our judges collected thousands of policy quotes to identify the insurers who offered the best value and quality cover on their policies, making it easier than ever to find a great policy for your property. You can find out which insurers won the hearts of our expert judges by heading over to our 2019 Mozo Experts Choice Landlord Insurance Awards winners page.
Snag a great deal on your home loan
With the RBA cutting the cash rate to a record low of 0.75%, many lenders have chosen to pass a cut onto customers. The result? Lower interest rates. So why not take advantage of the current rate war between lenders by snagging yourself a sweet home loan deal - it could save you thousands in repayments and interest.
At the time of writing, the average variable interest rate in the Mozo database for investors making principal and interest repayments is 4.19%, and the lowest variable rate was the loans.com.au Smart Home Loan at 3.19% (3.21% comparison rate*).^
Say you borrowed $400,000 on the average variable rate of 4.19% for 30 years, according to our home loan repayments calculator, your monthly repayments would total $1,954 and the total interest paid a massive $303,345. Now using the 3.19% variable rate, your monthly repayments would drop to $1,728 and the total interest paid, $221,965 - a difference of $226 and $81,380, respectively.
Try something different
One of the more tedious parts of owning an investment property are the number of fees that you’ll need to pay to keep things running, like property management fees. Property managers perform tasks like finding tenants, undertaking inspections and ensuring that rent is always paid on time - essentially taking the burden off your shoulders. The downside? Hefty fees that are charged based on a percentage of the weekly rental price.
But thanks to evolving companies, like :Different, investors have the chance to avoid the sting. :Different offers a monthly fixed fee of $100 and provides a full property management service. According to the company, they believe their service can help Aussie investors in Queensland alone save between $280 - $1,000 a year on property management fees, or $169 million state-wide.
Start an emergency fund
If there’s one saying that always rings true, it’s that it’s better to be safe than sorry. And what’s safer than having an emergency fund ready to go for times when you feel like saying f*** off. You might want to think about opening a separate savings account for this, as if you keep it in your regular savings account you may be tempted to spend it.
Having an emergency fund will also keep you from borrowing more money from your lender or relying on your credit card to cover the cost.
Have the right team on your side
As a property investor, it’s important to surround yourself with experts who will work with you, not against you, and that includes your accountant. It’s important to choose an accountant who is an expert in property and can help maximise your tax return if your property is negatively geared. Your accountant should also be up to scratch with the latest law changes that could impact your property and suggest options to minimise any risk or liability.
Want more information on buying an investment property? You can flick through our range of guides or jump right over to our investment home loan comparison tool to start shopping around on investment loans.
*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
^Apply now to get this rate from 17 October 2019