It’s a challenging environment for property investors – prices are falling, rates are rising, rental property is in oversupply and auction clearance rates are low.
If you are taking on these headwinds as an investor, do you have a strategy in place to prepare?
The Australian Financial Review’s Duncan Hughes has put together an excellent checklist of your options to review your finances and lower costs and stay ahead of the game.
Tweak your loan
Reviewing your mortgage finances could shave hundreds of dollars off your repayments each month if you have a $1 million portfolio with 20 per cent equity.
You can also push for temporary discounts, fee reductions, cash incentives or rewards points.
If you are a $1 million investor you have over 630 fixed and 240 variable loans to choose from.
Look at packages
Investors can shave up to 20 basis points off their headline rate on standard variable package rates from the big banks.
Package rates usually include discount insurance, credit card and lending facilities.
Choose your fixed rate
Plenty of financial advisers are recommending property buyers and investors lower their costs by shopping around for the best rates.
For example, an investor with a $1 million fixed rate loan could reduce their headline rate by over 130 basis points by switching to the lowest one-year rate of 3.79 per cent from Freedom Loans.
That’s a saving of $600 a month on the highest variable packaged rate.
Understand context
The market is rapidly changing and the recent seven-year boom in Melbourne is slowing but despite this, Australia’s growing population and economy make property investment still a good long term investment.
Most economists predict subdued demand for the foreseeable future however.
Be loan-ready
Not everyone who tries to refinance their mortgage is successful, in fact the failure rate is quite high.
With stricter lending criteria and regulator crackdowns, that is unlikely to change anytime soon.
Get yourself loan-ready and in a position for a successful application to avoid being stuck and forced to pay higher default standard variable rates.
Rainy day funds
It can be a good idea to have a cheap line of credit to keep up repayments when replacing a tenant or covering rental shortfalls.
A good example is to have a line of credit loan, or a home equity loan, which is an approved credit facility that allows withdrawals when necessary.
Review landlord strategy
Review your landlord strategy to ensure you are maximizing returns.
Retaining existing tenants is the most obvious way to do that, and other tactics can include setting the rental at an appropriate level based on the market and reviewing the rent every 12 months.
