How to ditch your fears about property investing
An interesting thing happens whenever I kick off a new mentoring program.
There are always at least a couple of people who I can see really want to participate in our property mentoring courses, however their spouses or partners are afraid.
They’re afraid of all sorts of things… afraid to borrow money, afraid to become a landlord, afraid they’ll buy the wrong property, afraid they’ll ultimate lose money.
Some of them are terrified of getting into more debt than they already have – this is one of the most common fears that crops up.
The reason for this is, they haven’t been educated into understanding the difference between good debt and bad debt.
Once properly understood, your fear of good debt quickly disappears and you begin to welcome good debt with open arms.
Until this fear is overcome, it just isn’t possible to successfully build a property investment portfolio.
Here are just some of the things investors can lose sleep over – and therefore delay taking any action on their property investing goals:
– What happens if I can’t find a tenant?
– What happens if the property burns down?
– What happens if I lose my job and have trouble paying the mortgage and other costs?
– What happens if my tenant doesn’t pay the rent?
– What if my tenant does a runner, or damages the property?
– What if the tenant makes all sorts of unreasonable requests, and I spend my whole life running around doing repairs?
These are all totally normal concerns. But just because they are possibilities, that doesn’t mean you need to fear what will happen if they come true.
I can say that I’ve had all of the above issues happen, except for a property burning down! And do you know what? I survived to tell the tale!
Not only that, but I’ve also made a lot of money out of real estate, so these small setbacks were well and truly worth the pain.
There are many things you can do as an investor to mitigate your fears of what could go wrong as a landlord.
One of them is insurance. This includes building, contents and landlords insurance policies. Your investment property is worth hundreds of thousands of dollars and having appropriate insurance in place will give you peace of mind today and tomorrow.
As part of your mortgage, your financier also requires you to have building insurance; however building insurance does not cover you for any of the contents such as carpets, window furnishings and light fittings. Therefore you will need to obtain contents insurance as well; your insurance company will advise you on how much contents cover you will require.
You may want to consider personal income protection, which is a form of insurance that pays you a monthly income (usually up to 75% of your regular salary) if you can no longer work due to illness.
Finally, most comprehensive landlords insurance policies will cover a number of what-ifs that keep investors awake at night, including the costs involved in:
– any damage to the property caused by the tenant;
– replacement if the property is destroyed;
– tenant squatting and not paying their rent;
– tenant leaving without paying rent;
– loss of rent while damage is repaired;
– and legal liability.
Should the tenant or the tenant’s visitors misbehave or become injured in any way, at least you know your insurance policy will cover it. You will need to consult with an expert insurance agent to make sure you have the correct insurance coverage for your property.
If your investment property is part of a complex, building insurance is generally covered under the body corporate insurance policy. However, make sure the policy is adequate for your peace of mind and includes areas such as your car park and/or storage areas on your part of the title.
Lower your risks of getting a dodgy tenant in the first place by recruiting a good property manager to be part of your team. Trust me on this – a quality property manager is worth their weight in gold, as they can help you avoid some of these problems before they even arise!