You may be wondering how to make things work when we’ve seen so much change recently, and there is a risk of even more changes to come. Here’s a tip: change is nothing new to property investment. I’ve lost count of the number of changes we’ve seen over the last 20+ years. You could say that change is the one sure thing that you can rely on. So how can you reduce risk in a period of uncertainty and seemingly constant changes?

10 Ways To Reduce Property Investment

1. Have a plan: Know the strategy/ strategies that are going to help you reach your long-term goals, and understand what return you need in order to get there.

2. Increase your knowledge: Learn as much as you can about property investment, because the more you know, the lower your risk. It’s the stuff you don’t know that you don’t know that will be expensive lessons learned the hard way. A team of professionals is a great way to leverage both time and money in order to help you reach your long-term goals. Property investing is not a solo sport, and I’ve never met an individual who was a great accountant, lawyer, mortgage adviser, insurance adviser, financial adviser as well as a great property manager and mentor for themselves.

3. Insurance: Speak to an independent insurance adviser to ensure that you have the most appropriate cover for your overall situation. Landlord protection insurance is also an absolute must have in my opinion. A great insurance adviser will help you to get the balance just right, so you have sufficient cover without paying for anything you don’t need.

4. Mortgages: Get advice from an independent mortgage adviser to ensure that you have spread your risk now that interest rates are on the increase. You don’t want to have all of your mortgages coming off a low interest rate at the same time or that will have a significant impact on your overall cash flow position. You can spread the risk, by staggering the expiry dates. You can also reduce risk by spreading your lending across more than one lender.

5. Don’t skimp on your due diligence: Research the area as well as the property before you go unconditional on a purchase. Building inspection, methamphetamine test, independent rental appraisal, etc are all important parts of the process in order to reduce your risk. It’s also important to ensure that you don’t pay more for a property than it is worth.

6. Don’t rely on the advice given to you by the person who is selling you the property: They have a vested financial interest in you purchasing it, and you will be the one stuck with a lemon if you don’t do your own homework before you buy.

7. Have correct structures in place for asset protection and tax purposes: Get advice from an accountant who understands property investment to help you with this.

8. Know your numbers before you go unconditional: What does your pre-tax cash flow look like? How will your aftertax cash flow look? What impact will higher interest rates have on your cash flow position? Most importantly, unless you have cash that you are prepared to leave in the property, ensure that you crunch all of your numbers at 100% of the purchase price plus any renovation costs. Understand that properties don’t look after themselves: You need to have a realistic budget that includes repairs and maintenance (even for new builds).

9. Avoid small towns with shrinking populations: I don’t care how good the cash flow looks on day one, it is going to look pretty awful if further down the track your tenant moves out and you can’t find another one. If the population is less than 20,000 that is an increased level of risk, and it gets even worse if the population is shrinking.

10. Understand that there is no such thing as a no risk investment. Buy property when you can buy, but know that there is never going to be a perfect time to start, and also know that there is no such thing as “one size fits all” with property investment. Learn how to manage change as/when it happens, and stay informed so you don’t make snap decisions that you could regret later.