04.04.23
After the RBA’s ten straight interest rate rises, property investors would be forgiven for thinking RBA Governor Philip Lowe has a vendetta against them. It’s been an unusually rapid rate rising cycle by the Australian central bank. However, acknowledging how painful it’s been doesn’t help property investors who are now living with much higher interest rates than a year ago. Many properties which were previously generating positive cash flows are now inadvertently negatively geared. The good news is there are some useful strategies to help property investors alleviate the pain caused by higher interest rates…
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Investigate refinancing with your mortgage broker
The mortgage market remains competitive so your broker may well be able to find an opportunity to refinance on more favourable terms. A saving of 0.5% p.a. on your interest rate could make a significant difference in the coming months. There are also numerous cash back incentives available.
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Ensure you have a high quality tenant
In the face of rising interest costs, landlords are more dependent on receiving rental income each and every month. Ensuring you have a high-quality tenant who is positioned to meet their rental obligations is an important strategy in aIs your rising interest rate cycle.
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Reduce costs
It’s a sensible time to reduce your other property ownership costs, or at least to ensure you aren’t overpaying. For example, if you’re engaging contractors for maintenance work, make sure you shop around for a competitive quote.
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Review your Rent
Conduct a review of the market where your property is located to understand the supply and demand dynamics of the area. Use Domain or RealEstate.com.au to compare available properties with your own, see how fast properties are moving on the market and determine if the rental you are charging is fair or could be increased. Ask your Managing Agent for their opinion too and market updates.
As Landen’s Head of Wealth, Malcolm Strain explains: ‘If you’re a property investor who’s been wrong-footed by the RBA’s aggressive rate hiking cycle, it’s time you got back onto the front foot. By making a series of small changes like reviewing your rental, reducing your costs or refinancing your loan to save interest costs, investors can position themselves to ride out this rate rising cycle. We’re advising our clients to proactively position themselves for another few months of rate rises and to be ready to engage their equity so they’re able to benefit from the next upward move in the property market.’