How to Protect Your Assets and Expand Your Property Portfolio

Building a healthy and extensive property portfolio is an ambition and life’s work for many people. Typically, people appreciate the long term financial security afforded by property and recognise that the accumulation of investment properties can create a stable financial situation.

However, many investors are justifiably concerned that property investment can jeopardise their asset base which includes their complete property portfolio. Consequently, they want to know effective strategies for maintaining the safety of their assets.

The value of income protection insurance:

Many people have negatively geared investment properties and increasingly, employment trends are shifting in such a way that contracts and self employment are increasingly popular options. While there are benefits to these types of employment, they can lack the medium term stability and security that can come from permanent employment.

Income protection insurance can help to ensure that you receive a designated amount of money even if there is a decline in your work or you are entirely unable to work. Such insurance provides cover for illness and disability and can help you to meet your financial obligations in terms of your investment properties – the very investments that you intend to have support you in the future!

Keep in mind too that the premium for income protection insurance is tax deductible.

Landlord’s insurance:

There are too many horror stories of tenants who have destroyed properties and failed to pay rent to not have the protection of landlord’s insurance. This form of insurance offers owners of an investment property the confidence that, should significant repairs be necessary and rent be lost, you are appropriately protected.

Of course, every landlord hopes that a quality tenant will be found for their investment property, but the incredible costs of a bad tenant are offset by landlord’s insurance. A further benefit of landlord’s insurance is that it is also tax deductible.

A cash buffer:

Owning property does not mean that you should have all your cash tied up. To the contrary, it is possible that there will be times that you need to obtain some cash quickly and the best way to ensure that this can be achieved is to keep some on hand.

Instead of handing over all the cash that you have, it is preferable to satisfy the bank or lender with hard assets; doing so means that you can keep some cash on standby and within your own control. Many property investors choose to keep such cash in a mortgage offset account or other line of credit.

Borrowing enough to cover expenses:

While this may superficially seem a false economy, borrowing more than you need may help you to cover costs incurred on top of the property itself, including legal and purchase costs, can be wise. This option is usually only available to people whose loan-to-value ratio (LVR) can accommodate a few thousand dollars more being borrowed.

Lock in your interest rate:

Astute property investors are continually watching the market to try to predict interest rate movements. Similarly, astute investors often opt to lock in all or part of their loan at a fixed interest rate in the hope that for the term in which the rate is fixed, the fixed rate will help them to enjoy an interest rate that is lower than variable interest rates in the future.

Every property investor wants to expand their portfolio but never at the expense of the assets that they already own. It is important that investors capitalise on strategies to enhance their financial position while ensuring that their existing assets remain safe and protected. Of course, property investors are well advised to seek the guidance of a credible and experienced professional.

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