It’s All In The Budget

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 its 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, contents, landlord protection, public liability) Factor in rent to cover 2 weeks vacancy per annum

4-7 years: Replacement of hot water system

5 years: Repaint

8 years: Re-carpet

9 years: Replace blinds and window coverings

10 years: Replace stove, dishwasher, clothes dryer

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.