Protecting Your Investment Property During Tough Times

Protecting Your Investment Property During Tough Times

The bushfires in December 2019 and the coronavirus pandemic are two of the most recent events that have brought significant changes in the Australian real estate market. Catastrophic events like these are out of everyone’s control and it is natural to feel confused and helpless as a property investor.

Despite all this, one should always remember that the real estate market has always survived recessions with huge rebounds years after. The harder the market falls, the higher it jumps back. Good investments can even go unscathed after the chaos is over. The global economy will adapt and learn from events and will come up with better survival strategies in the coming years.

Earning profits from investment properties is one thing and keeping that investment property safe is another thing. There’s no assurance of profit in any investment. So, protecting your investment properties from any kind of loss becomes paramount and more important than anything else. If you want to keep your investment safe, you need to be prepared to protect it, not just from mistakes that can hurt you financially but also from potentially devastating scenarios such as a pandemic.

Investments are long term projects and during challenging times, it’s more important than ever to make the right decisions. So how do you protect your investment from these crippling economic downturns and unexpected market crashes? Let’s have a look at the available options:

Take Advantage of Low Mortgage Rates

Low-interest rate means it will be much easier now to own or invest in a property. Knowing when to buy and when to sell your property can have huge rewards. This is why smart investors hire financial advisors to help them navigate through tough financial times.
Since most people are working from home right now, or have reduced income, or are unemployed, house prices will continue to fall. Investors must take advantage of this by purchasing properties or paying down mortgages and reducing debt. During market crashes, it’s not a good idea to have too much debt, and you would want to pay all your debt as quickly as possible.

Apply for Landlord Insurance

Just like how you would purchase insurance for your home, you can also get insurance for your investment properties. Most of these insurance cover rent arrears, damages from accidents (fire or flood) as well as potential damage from tenants.

When looking for insurance, don’t make the mistake of buying cheap ones to save money. Make sure that you’re getting insurance from a professional and trustworthy company.

Insurances are like umbrellas, they will keep you feeling secured and safe, and will help you during tough times and unforeseen rainy days.

Start Diversifying Your Property Investment Portfolio

Diversification is an important investing strategy to reduce risk, maximize your returns, and protect your investments. When choosing properties to invest in, explore all types: properties with plenty of cash flow, properties with low rent and high rent, and so on.
Don’t make the mistake of investing in only one real estate. Don’t ever limit yourself to one. Most investments start out as good but you never know when the market is going to change. Even “5-star” investments can suffer in recessions. Regardless of how good you think your investments are performing, don’t assume that it will always do well.

During times of uncertainty, diversification helps your portfolio if one sector goes down. Australia’s volatile and unpredictable real estate market is a big proof of why investors need to diversify.

Hire a Property Manager

You may have extensive investing experience but sometimes experts also need a little help. In challenging times like these, it’s always a good idea to ask for a property manager’s help. When choosing the right person for the job, make sure to ask for references, and get in touch with their previous clients. You can also hire a management company if you have the budget. Although they cost more, they can help you maximize your property value, keep repair costs down, and take care of routine maintenance issues.

Save Funds for Emergency

Salary cuts, delays in payout, and unemployment can all take a toll on your finances during tough times. So make sure you have your war chest ready and are prepared for the worst. The problem with most people is they underestimate how much-unexpected bills can damage their finances. In fact, more than half of investors, don’t have enough emergency funds or insurance for their investment properties.

Before you triple your investment, make sure you have saved enough to help you survive during a recession. Make your emergency funds easily accessible. This will help you cover losses and prevent you from using your retirement money in a cash crunch.

So how much emergency found should you have? A full-time real estate investor with an irregular income should have 3-6 months of emergency funds ready. A landlord will need a much larger emergency fund. Landlords and real estate owners need to have emergency funds for each of their properties.

Final Thoughts

Being an investor in times of financial struggles can be challenging, and understandably so. It’s okay to feel stressed—but don’t panic. How you approach your investments today can help you a lot in the future. In times of uncertainty, remaining patient and smart is the key to earning wealth. At Mirren, we can help you make the most of all the opportunities the current scenario has brought to the Australian property investors. We’d be happy to connect!.