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 maintaining the property, giving it the best chance of remaining tenanted; and
- 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 an account you have immediate access to the money if needed.
Before calculating a buffer, ensure you have a budget and savings plan in place that identifies their accurate living expenses and ability to save. We recommend a buffer of three to six months’ worth of loan repayments and living expenses.”
For those who find themselves needing to improve a property without a buffer, there are short-term options available. Personal loans and credit cards may cater to urgent funding, but they do attract higher interest rates and fees. If you are in a position for whatever reason that you need to seek out short term funding, it’s imperative to have a strategy in place to pay back this debt as soon as possible. This could including refinancing the investment loan of your property and draw down equity to pay back the short term loan funding, but ensure that you revisit your buffer strategy to help avoid any further reliance on short term funding.
Matching the right property investors with the right loans change over time as your progress through the investor life cycle. Want to know if you have the best investment loan structure for you, get in touch.