Welcome Back! This is going to be a quick and simple tidbit on negative gearing and ways to minimize your risk. As we’re sure you know by now since we say it all the time… with every investment there is an underlying risk. Now, how you handle that risk and take the steps to minimise that risk is in your hands. If you’re feeling a bit confused on to what we’re talking about have a look back at Part 1 Negative Gearing: What is it & How Does it Work? and Part 2 Negative Gearing: Potential Risks of our negative gearing series.
1. Do Your Research
First and foremost, research all parties involved and any reviews of these parties. It will give you valuable insight into what you’re walking into. Also, very important for you to research the area in which your investment property will be and ask questions about other investments in the area and their returns. You don’t want to be hung out to dry or taken advantage of which unfortunately a lot of wealth creation offices and investment property facilitators do.
2. Location, Location, Location
With that being said, choosing your investment property wisely is crucial. You want to ensure that your property will be close to major amenities (think transport) and catch the eye of a wide-range of future tenants. If you don’t, you risk only seeking out one type of tenant, for example, if you are in a remote area your tenant will have to be able to afford their own transport, etc. Choosing wisely and making sure you cater to a lot of tenants will assure that your property won’t fall victim to neglect (vacancy).
3. Keep Your Income Managed!
Keep your income managed! Keep your income managed! Should we say it again? Income management is crucial. Once you’ve achieved your investment property it isn’t going to upkeep itself! It’ll need repairs and sometimes they can be costly. Also, sometimes your property may be vacant which means no rental income! So, income management for all expenses is necessary and not just every-day expenses!
4. Ask Your Professional Questions
Last but equally as important, protecting yourself and your investment. Insuring your property and yourself if an unforeseen circumstance arises. Make sure you ask your mortgage broker, financial planner, or other third party about insurances available to property investors and what insurance is best for your property!
These four simple things can help reduce your risks in negative gearing significantly, and also being aware of these risks reduces the onset fear if anything negative is to happen.
So, if you think negative gearing may be something you’re interested in you’ll be equipped with questions to ask and be prepared. Educate yourself to protect yourself!