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Common Mistakes
The X-Company
Common Mistakes
Managing tenants can be a time consuming activity, you’ll find yourself spending time that could be otherwise spent on improving your investment portfolio on tenant wants and needs.
Investing in older properties will mean that you miss out on depreciation benefits. Investors can only claim depreciation tax deductions on property less than 40 years old. Moreover, newer properties often experience lower vacancy rates, maintenance costs and produce a larger capital gain on resell
Cross-collateralisation is when you use two or more properties financed by one bank to secure loans with the same bank for further properties. By having your home loan and your other properties all under the same bank, the bank holds all the cards and your putting your own home at risk.
You can avoid cross-collateralisation by using the equity from your home to cover the deposit and costs of buying another property without putting the home at risk.
Real estate agents’ interests are completely different to yours. Their end goal is to sell certain properties, and with that in mind, they cannot be trusted for advice.
Getting a loan with a low interest rate does not guarantee you the cheapest loan out there. Some banks will limit extra payments into your loan, while others will enact a minimum loan amount for you to qualify for the cheap deal. Moreover, you may even face break fees if you want to get out of a fixed rate before the term ends, or may be unable to redraw additional payments.
If you don’t stay up to date with your equity position, you could be missing out on disposable equity that’s not being used for deposits on additional investments. To avoid, this make sure you know your properties’ values, and when sales results in your area are looking good, get the bank to revalue the property.
A finance clause gives you the ability to pull out of the contract if you can’t obtain the necessary funding to purchase the property.