Urgent maintenance is an unavoidable aspect of being a property owner, so having a cash buffer set aside as a landlord will help you deal with any unexpected problems.
When renting out an investment property, having access to extra cash is vital for two reasons:
● to cover the costs of maintaining the property, giving it the best chance of remaining tenanted; and
● to cover the cost of the mortgage should you have a period of no rental income
Having a savings buffer can assist with making sure you are not stretched to your financial limits while on your investment journey.
Ideally, your savings would sit in an offset account, or redraw facility, against your mortgage. By utilising an offset account or redraw you can have immediate access to the money while at the same time reducing the principal, and therefore the total interest payable on, your loan.
Before assessing the level of savings that should be put aside it is important to put together a budget that identifies an accurate assessment of living expenses. I would then suggest that you should consider having the equivalent of three months worth of loan repayments and living expenses set aside as a savings ‘buffer’.
Having this peace of mind that you have funds available should you experience unexpected expenses, or the short term loss of tenant, will make the whole investment experience a much more enjoyable journey.
It is also important that property investors have a loan facility established that meets their requirements while providing competitive rates and fees. Your local Mortgage Broker will have access to a wide range of lenders and loan products to match property investors with the right loan to match their changing needs.