Paralaysed by thoughts of what might go wrong? Tracey Lunniss sets out the five most common fears of prospective investors, and how to address them.
What if we have problems with tenants – or can’t get one?
Make sure you have landlord insurance set up which will cover you for damage or loss of rent. You should also line up a good property manager as soon as possible – ideally prior to settling – to help you get a tenant in as soon as possible, and to do the hard work of tenant screening, lease agreements and liaison.
What if I buy the wrong property?
There’s no substitute for research here – buy a property in an area where you know it can be rented, and where capital growth is likely. Remember, too, that property is a very forgiving investment – I have clients who’ve made every mistake in the book, and they’ve still made money.
What if I can’t meet the mortgage payments?
Get your finances in order before you start investing: principally, make sure that you can cover the payments, and that you’ve got a cash buffer to cover you for unexpected circumstances. You should also get acquainted with techniques to make things more affordable, such as negative gearing and depreciation allowance. Finally, buy a property in an area where you know you can sell it if you have to, so that you’ve got the ultimate get-out clause if it all goes wrong.
What if I end up losing money?
Be proactive about adding value – consider renovations, even if it’s just repainting and putting in new carpets. Take control of your asset – don’t just leave it down to market forces.
What if it’s a scam?
Again, this comes down to research. Scams typically trade on ignorance: as long as you are thorough about investigating your chosen areas, you should be fine. And remember, if it seems too good to be true, it probably is!