3 Handy Finance Hacks every Investor could use
Whether you have other investment holdings or solely rely on your investment property, understanding how to manage your finance is critical.
The key principle that underpins the effective management of your money, is making sure that once you’ve worked hard to earn your money, that you put it to work for you.
Here are three finance hacks every property investor should make use of to make sure your investments are working hard or you.
Don’t cross-collateralise your investments
If you have a number of investment properties through one lender, the loans on these properties may have been cross- collateralised to help secure the mortgage on your next property. Sure, this can be powerful in helping you to grow your portfolio, but if you sell a property, your lender may need you to pay down the debt on your other properties to balance your LVR ratios.
To avoid a situation where your mortgages could be cross-collateralised, try going to different lenders for each property transaction or be specific with your lender about making sure your loans aren’t cross-collateralised.
An Offset account is your best friend
Having an offset account is a great tool for reducing the interest on your loan and keeping funds in a separate account for tax efficiency. With an offset account, you don’t earn interest on your savings, but the balance is deducted from your loan balance. This reduction in your loan balance results in a decrease in the interest you need to pay on your loan.
Cash buffers are essential
This is an important one even if you’re not a property investor, but it’s especially important to make sure you don’t end up financially strapped if an emergency arises. Build up and keep a cash buffer to cover any unexpected expenses that may need to be covered for your properties.
A solid cash buffer will mean you have the finance available, if needed, to cover unexpected expenses without using your savings or needing to refinance your property. Talk to your accountant to review the outgoings on your property and rental yield to determine the amounts of cash you should have set aside.
Effectively managing your money is crucial, so it’s important you regularly speak with your trusted advisor not just about your property portfolio but your wider financial situation.
If you have any questions, or need clarification on any of the above, please contact Anna Marten, our Head of Property Management, on 9651 1666 or anna@guardianrealty.com.au.
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