There may be no magic metrics to judge your finances to pull the trigger on a property purchase, there are a few questions you can ask yourself to see if you’re in a good place to start building a portfolio.
# 1: Do you have the cash flow to handle investment expenses if they go over rental income?
Using a budget calculator, take your current expenses from your income and see if what’s left is enough to handle the costs of an investment property. Though you might be counting on rental income to pay for the loan on the property, it is important to your financial health to have a backup plan if needed.
# 2: Do you have the savings to cover periods of vacancy or additional expenses?
There will be times when your property is vacant, and you won’t have the rental income to cover the mortgage and expenses. For such times it’s important to have savings to dip in to. Savings should have enough money to cover expenses for 3 to 6 months before investing.
# 3: Are you good with a budget?
Establishing the discipline of living within a budget is an excellent sign that you have control of your finances. When your income and expenses are in clear view, you can glance over it all and quickly see if you’re in a position to go through the ups and downs of an investment property.
# 4: Are you in debt?
Not all debt is bad, but it’s important that your debts are minimal. What do we mean by that? What we mean is your debt shouldn’t have the potential to completely cripple your finances.
# 5: Is your credit report in good standing?
Your credit report is a big factor that will help lenders determine how suitable you are to borrow and what interest rate they will offer you.
You currently have the right as an Australian to order a copy of your credit report once a year at no cost, so you can find out what’s on it and make corrections to any inaccurate information.
For information on where to begin, call us on 1 800 3 PEASY or visit https://peasy.com.au/ today.