What to Look For in Your Landlord Insurance Policy

What to Look For in Your Landlord Insurance Policy

Landlord insurance is a vital part of protecting one of your most valuable assets:  your investment property. A landlord insurance policy can protect your building, fixtures and contents, as well as provide additional options for tenant default and theft.     Does the policy cover building, contents, or both?  When choosing your landlord policy, you will usually be able to select whether you would like to cover your building, contents, or both. If you are opting for building landlord insurance only, check that your policy includes fixtures such as air-conditioners, dishwashers, and fans. Otherwise any significant damage to your property will leave you substantially out of pocket. If your property is furnished, you’ll want to consider contents insurance. Contents insurance not only covers loose items, but will usually also protect movable swimming pools or spas, carpets, curtains and removable light fittings.    Are you covered against the most common natural events?  Natural events can devastate your property in a matter of minutes, so make sure you’re properly protected. As a minimum, check that your policy covers fire, storm, and impact damage. If you’re in an area where flooding is possible, you’ll also want to look into flood cover. Most policies will allow you to add this as an additional extra, subject to certain eligibility criteria.    Are you protected against legal liability?  Most people don’t consider legal liability when choosing a landlord insurance policy, but it is one of the most expensive costs a property owner can face. Legal liability cover will protect you against claims arising from injury to another person or their property, caused by or within your investment property....
New strata laws and their benefit to investors

New strata laws and their benefit to investors

In case you haven’t taken the time to update yourself more than 90 strata law changes passed by the NSW Government came into effect on 30 November 2016 and investors looking to renovate their apartments could reap the rewards. The laws, which changed as part of the usual 10-year re-evaluation, have been viewed as potentially revolutionary for apartment owners, due to a change in the “strata renewal” clause which will allow 75 per cent of owners to support developmental changes instead of the previous 100 per cent. The changes present great opportunities for investors in older blocks, opening up the chance to sell to developers or renovate to increase capital growth without 100 per cent backing by other owners. The new laws have been designed to not only make it easier to update ageing buildings, but to increase density as part of the government’s urban renewal strategy. Apartment owners can choose to cash in by selling to a developer, but they may be better off holding on and redeveloping their property to perhaps add a penthouse or other amenities with the benefits shared by all owners. Not everyone is happy with the changes; critics of the laws have said they provide unfair pressure on financially vulnerable residents who may be forced into changes they do not support. Other changes that came into place include the role of developers in strata committees – they are no longer able to act as strata managers or vote on building defects. Owners need to review the funding of a 10-year capital works budget (previously called a ‘sinking fund’) at their initial and annual meetings; previously...
Build a large property portfolio on an average income

Build a large property portfolio on an average income

One of the most common concerns from investors on the lower end of the income scale is that they can’t afford large portfolios. This could not be further from the truth. Anyone can get started building an investment property portfolio, even those with only average income. Do your research When people are first getting started in property investing, they often try to choose properties based on emotional attachments rather than on financial projections. This is perfectly fine if they are shopping for their personal home, but it is hugely detrimental when shopping for investment properties. Instead of choosing a property because they fall in love with it, they need to look at properties from an investment perspective. They may not be as beautiful as a home they would buy for themselves. They may not be in an area with which they are familiar. Although if the home is functional and in a good location – and in the correct part of the property cycle – it can be incredibly lucrative as an investment property. Obtain a mortgage Often investors with average income think they need to save up a massive deposit to purchase a property. In reality, they can qualify for a mortgage with very little money upfront. Keep in mind that your tenants will be paying you monthly rent, which you can then use to pay your mortgage. Many mortgage agreements will even let you make interest-only repayments on investment properties. This can help to keep your expenses down while you are seeking out tenants. Use your equity If you have equity built up in your personal home, you can...
The pros and cons of interest-only property loans

The pros and cons of interest-only property loans

Interest-only property loans can enable property investors to minimise their mortgage repayments, redirect their cash to high-returning investments and take advantage of a booming property market. Investors have a lot of choices to make when they’re building their property portfolios — where will they buy? Will they look in capital cities or regional areas? Will they purchase a house or a unit? Does the property need a renovation? Will the renovation need to be cosmetic or structural? Which is more important: cash flow or capital growth? One of the choices investors will have to make with each new purchase relates to the structure and type of loan they will take out. Should you get an interest-only home loan for your property investment purchase or should you take the principal and interest option? The answer will depend on; Your property investment strategy How highly leveraged your portfolio is How quickly you are purchasing assets How well you handle your finances.   Interest-only loans are often touted as an effective finance mechanism for property investors.  The loan is much like other types of mortgages — it is a debt instrument which is secured by your property — but the monthly repayments simply cover the interest part of the loan. You’re not paying off the ‘principal’ part of the loan. The only way you increase your equity is through capital appreciation. Interest-only loans tend to have a more flexible repayment schedule. The monthly repayments are lower than they would be on a principal and interest loan, which frees up additional cash flow. With the smaller loan repayments, investors using interest-only loans can...
Smart things to do with your tax return

Smart things to do with your tax return

It is estimated that more than 70 per cent of Australians receive a tax return each year, and the average return has historically been in excess of $2,000, which is a decent chunk of money! So what will you do with yours? If you are one of the lucky ones to receive a tax return this year, remember that it is part of your hard-earned money and should be treated the same as the rest of your salary or income and allocated to something useful. Don’t treat it as a windfall or a bonus and blow it on something unnecessary. Be smart this year and use your tax return to build your own financial security. Pay off high-interest debt Pay off high-interest debt (such as credit cards) as soon as possible. Often you can be paying interest as high as 20 per cent on credit cards and each month you are simply throwing away good money on interest bills. Invest it If you are getting a sizeable return this year, consider using it towards a deposit for your first (or next) investment property. The best thing you can do is speak to an experienced finance broker who can tell you what you need. Even if it’s not enough to buy a property now, it is certainly a good lump sum to add towards your savings. Pay off your home loan A major goal you should always try and work towards if you want to achieve financial security in life is paying off the mortgage on your own property (or the family home) as soon as possible. The sooner you...
Purchasing property through your SMSF

Purchasing property through your SMSF

Self-managed super funds (SMSFs) offer investors the opportunity to buy property with cash accrued in their super fund. This comes with some lucrative benefits that may help build your retirement savings. SMSFs offer a key benefit of using the accrued cash in your SMSF to fund the purchase of investment properties. If you have the cash available in your SMSF, you can buy an investment property outright and set up a rental income stream that will pay into your fund leading up to and during your retirement. You can also borrow money to buy property through your SMSF, which may help grow your portfolio for potentially big capital gain returns when you retire. Things you need to know about buying property through your SMSF: 1. A clear investment strategy You’ll need an investment strategy in place to ensure any properties you buy are aligned with your financial goals. You need to decide if you want to draw an income from rent paid on the property you buy, or cash in on long-term capital gains when you sell – or a combination of both. Your investment strategy will determine the type of property you should buy, and how you finance it. 2. You can buy residential and commercial properties You can buy both residential and commercial properties through your SMSF. If you have cash in your SMSF to buy a property outright, you can do so without taking out a loan or you can choose to use the cash in your SMSF to cover the deposit and borrow the rest. Again the direction you choose depends on your investment strategy. If...