Financial Tips For Property Investors
Financial management is an important skill for budgeting and keeping afloat in this commission-driven profession—especially during the initial phase of launching your real estate business. As a new real estate agent, you must deal with the unpredictability of when and how much you earn. Here are finance tips for property investing.
Consolidate Personal Debt Always look for the opportunity to consolidate any personal loans which have a higher rate of interest as these don’t only cost you more in interest but also impact on your borrowing capacity. This includes any interest on store cards from a department store.
Use different lenders Loyalty and convenience is the main reason people continue to use the same lender to borrow money. Unfortunately this is reducing the amount that you are able to borrow and increasing your risk as one lender funding your whole portfolio results in them assessing all your properties as a whole rather than individually. By using different lenders you can always find the best deal, increase your borrowing ability and stay control of your assets.
Have a Plan or Strategy No one plans to fail‌ they just fail to plan! We’ve all heard that saying before. Like any successful business, an investor should prepare a detailed business plan detailing the strategy to grow their property portfolio, the finance that is required to achieve this and a cash flow analysis of how the debt and other costs are to be serviced.
Regularly Review Your Security Giving too much security to lenders can greatly restrict your investment potential. As far as lenders are concerned there is never too much security. Review your property values annually and have them revalued with the bank whenever there is a reasonable increase of around 7%. Over time you will be able to remove the security from your home or from one of the investment properties.
Have a Line of Credit Focus on the positive but be prepared for the negatives! Unfortunately too few investors take this advice. They have done nothing to ensure that their cash flow is protected if times get tough. By having a cash reserve set up properly from the start through a line of credit or redraw facility you have this buffer in place to give yourself peace of mind.
Interest Only vs Principle and Interest
Structuring your investment loans with interest only increases your borrowing capacity and still allows you in most case to pay down the principle if you wish.