Why Property Investors Need Savings

Why Property Investors Need Savings

Why Property Investors Need Savings

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 repairing and/or maintaining the property, giving it the best chance of remaining tenanted.
  • 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 a redraw or offset account against your mortgage, so that you have access to the money, while at the same time reducing the principal and therefore the total interest payable on your loan. To calculate how much you could save in interest, try our Home Loan Offset Calculator. We recommend seeking advice from a qualified accountant or financial planner with regards to using an offset account or redraw facility.

Before calculating a buffer, make sure you have a budget and savings plan in place that identifies your living expenses and ability to save accurately. As a suggestion, you could aim to have a buffer of three to six month in loan repayments and living expenses.

For investors without a buffer who need to make repairs to a property, there are short-term options available. Personal loans and credit cards may cater to urgent funding, but they typically attract higher interest rates and fees.

If you do need to access this type of credit, you may want to make it a priority to put a strategy in place to pay back this debt as soon as possible.

Contact Priority Home Loans Newcastle to find out how having those extra savings available could help you.

Priority Home Loans Newcastle

P: 02 4967 5256

E: info@phlnewcastle.com.au