If you are a landlord, consider these handy tips to minimise the financial impact during this difficult period.
- Talk to your bank. You should consider discussing with your bank the terms of your loan. For example, explore whether you can have your loan changed from principal and interest to interest only. This will assist in reducing your monthly repayments.
- Is your loan in advance? Many investors make additional loan repayments over the term of the loan. This has the effect of reducing the interest on the loan and paying off the loan more quickly. If, for example, you have paid in advance $10,000 of your loan balance and your loan repayments are, say, $2,000 monthly, you may be able to put a hold on your mortgage repayments for say, 5 months.
- Change your billing payment terms. Where you have the option to pay your property bills in increments, rather than pay in one lump sum annually in advance (for example council rates, insurances), consider paying monthly or quarterly for the time being.
- Some rent is better than no rent. If your tenants have legitimately lost their employment or their work hours have been reduced, some rent is better than no rent. It will be extremely difficult to find a replacement tenant during these trying times.
- Have your tenants lost their job or had their hours reduced? Through your real estate agent, you may request the tenant provide evidence from their employer(s) that their hours have been reduced or that they have been retrenched.
- Do you have landlord insurance? If so, check the terms of your landlord insurance. For example, if the rent is in arrears you may be covered by landlord insurance. If you forgive or reduce the rent, the reduction in rent received may not be claimable against your insurance. You need to check the terms of your individual policy.
- Property maintenance expenses. Request a delay with the various maintenance and service providers (such as the gardener, pool cleaners, council and strata levies). A delay on the utility bills should help your cash flow.
- Variation of tax. If you have a positively geared investment property it is likely that you are receiving a quarterly PAYG instalment. If you are considering a reduction in rent or a rent moratorium, then the profitability of the investment will be reduced and hence the tax payable on that investment will be reduced. You can apply through your accountant to have your PAYG instalment varied or reduced.
Should you require more information about cash flow management, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166.