HOME > BLOG > Investing > The issue of risk management in property investing

Risk management is vitally important in any sort of investing and that’s definitely the case for property investment as well. Before you take the plunge with any purchase, make sure you’re aware of all the risk factors.

When it comes to property investing, the saying "Without risk there is no reward" certainly rings true. There is always an element of risk when buying any kind of investment property. Some of these risks can be managed by having a good rental property manager, but other times things can simply be beyond your control.

Firstly, you need to assess whether a property is a good financial risk or not. Secondly, choosing the right tenants is vital. Checking references and having a rigorous application procedure and ongoing inspections are of utmost importance in order to minimise problems. If you’re thinking of making a purchase, make sure you do your research ask yourself these important questions:

  • Will the property value increase over time at the expected rate of growth?
  • Will rents for the property experience a good level of growth?
  • Should unforeseen circumstances cause you to sell yor investment property quickly at a time when markets are down, could you get out of it and still cover your costs?
  • Will the properly be tenanted most of the time?
  • Are the tenants likely to pay their rent consistently and on time?
  • Are the tenants likely to cause abnormal damage or trash the property?
  • If you have problems with the tenants, will you have difficulty in getting them out?
  • Are the tenants or their guests likely to be injured by something that should have been rectified by you?
  • Is the property likely to suffer damage from fire, weather events or vandalism?
  • If the property is damaged, will it be able to be repaired quickly to allow it to be tenanted again? How much rent will be lost? Will there be expenses related to the contract with the existing tenants if they are forced to move out and get other accommodation during the contract period?

Landlord insurance in property investment

  • One of the things that you certainly want to have in place with your investment property to counter risks is landlord insurance. Normal building insurance for a home generally doesn’t include carpets or curtains. Those are typically covered under your contents’ insurance, and you probably will not have that for your rental property. Additionally, most ordinary home building insurance policies don’t cover you for damage done by a person that you have invited into your home. That would include a tenant. Furthermore, should disaster strike or your tenant trashes the place, you are going to be out of pocket for the lost rent while the place gets fixed, even if the insurance company is covering the cost of repairs. Landlord insurance protects you from all these scenarios.

    When you have signed a contract of sale, you have obligations to purchase the property. It’s good to have your insurance in place as soon as the contract is signed so that you are covered should anything happen to it prior to your taking possession of it.

Loans for property investment

  • If you are involved in or are considering property investment, give the friendly credit managers at State Custodians a call. They are very experienced in providing the finances for such an investment and will be very helpful to you. Call today on 13 72 62.

  • Use a calculator to get an estimate of how much you can borrow. Try one here.

  • See if you qualify. To get a more accurate idea of how much you can borrow with State Custodians, click here.

  • Call our Lending Specialists and they can do the calculation for you over the phone plus answer any questions you have at the time. Talk to us on 13 72 62.