Successful budgeting not only applies to balancing a company's books or the household budget but is also vital to the successful financial planning of owning an investment property.
Savvy property investors realise that they must prepare a budget to cover all contingencies throughout the lifetime their investment property.
Given that most property investors own one investment property, it is vital that careful financial planning be front of mind when considering the purchase of an investment property so when outgoings arise, the cost does not eat into the investors personal budget.
If you presently own an investment property it's not too late to start budgeting for the recurring and future anticipated expenses that will arise.
In preparing your investment property budget it is suggested that you take into account the following:
Quarterly: Water and council rates, Strata levies
Annually:
Insurance premium (building and landlord protection) Approx. $1500/ year
Factor in rent to cover 2 weeks vacancy per annum
Factor in $1000 for general repairs and maintenance
5 years: Repaint
8 years: Recarpet
9 years: Replace blinds and window coverings
5-10 years: Replace kitchen appliances and air conditioning
7-10 years: Replacement of hot water system
Failing to adequately budget for such expenses can easily create the potential for financial disaster for highly geared investors.
Also, 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 be well maintained, thus securing the best tenant and achieving the best rent. This can only be done by prudent budgeting.
You've done the heavy lifting in purchasing an investment property, let us do the heavy lifting in maximising your returns and asset value. We understand your investment property is your future.
For a free copy of our Property Investors Guide or for an obligation-free chat, email our Director, Casey Healy on casey@c21newcastle.com.au or phone 02 4928 7400 today.