Successful budgeting not only applies to balancing a company’s books or the household budget, but is also vital to the successful financial planning related to owning an investment property.
Savvy property investors realise they must prepare a budget to cover all contingencies throughout the lifetime of owning their investment property.
It is vital that careful financial planning is front of mind when considering the purchase of an investment property. That way when outgoings arise, the cost doesn’t eat into the investor’s personal budget.
If you currently own an investment property, it’s not too late to start budgeting for any recurring costs and anticipated future expenses that may arise.
In preparing your investment property budget financial experts suggest that you take into account the following:
|Quarterly||Water and council rates, Strata levies|
Insurance premiums (building, contents, landlord protection, public liability)
Factor in rent to cover 2 week’s vacancy per annum
|Every 4-7 years||Replacement of hot water system|
|Every 5 years||Repaint|
|Every 8 years||Re-carpet|
|Every 9 years||Replace blinds and window coverings|
|Every 10 years||Replace main appliances (such as cooktop, oven and dishwasher)|
Failing to adequately budget for such expenses can easily create the potential for financial disaster for highly geared investors.
In addition, a delay in undertaking necessary work due to insufficient funds can actually cost more in the long run. Having a preventative maintenance program and budget in place will save you money and stress and may even prevent the loss of a tenant!
It is one of the golden rules of property investment that in order to maintain a sound investment, the property must not only be presented well, it must also be well maintained. Experience tells us that ticking all those boxes tends to result in the best tenants and the best rent. This can only be achieved with prudent budgeting.