How to manage your rental property during COVID-19
There is a lot of help out there for property owners who have been hit the hardest financially by COVID. If you are in this boat it is quite common, so you are not alone. If your tenants have been struggling suddenly and their ability to pay the rent on time has been diminished you may face a decline in your income. Fortunately, there are a lot of options to help you reduce your expenses and improve your financial situation.
Here are 6 things you can do to help manage the finances of your investment property during COVID.
Talk to your tenant
Step 1 is always to talk to your tenant. Having an open conversation with your tenant may help you all find a middle ground. Whether you talk to them yourself, or through your property manager, getting an update on your tenant’s current financial situation can provide clarity and help in finding a solution.
Sometimes you may need to temporary lower the rent to help your tenant, especially if they have been a great tenant. This could help you at least get some money flowing through again, reducing the size of any expenses you may have otherwise been out of pocket for.
Renegotiate with your lender for a lower interest rate
Renegotiate or consider refinancing your existing loan to take advantage of the low interest rates currently available. Doing so could reduce your monthly repayments significantly enough to save you thousands per year. Talk to a reputable mortgage broker about refinancing your property to take advantage of the low interest rates available.
Many lenders are also offering generous cashbacks. Often these are offered in combination with a lower interest rate. This might be enough to help you meet your loan repayments over the next few months.
Switch to interest-only payments
Another option you have available is switching to interest-only payments. This can help you in the short term to get through COVID with the potential side-effect of the chance your repayments increase after the interest only period.
While the rates on interest-only loans tend to be higher than other loan types your repayments could actually end up being lower. This is because you aren’t paying off the loan balance. When this interest-only period ends your repayments could increase in order to catch up on the principal payments that were missed during this time.
It is important that before taking steps towards an interest-only loan that you discuss your options with your mortgage broker and accountant. They will have the best ideas in regards to your unique situation and which options best suit you.
Use your redraw account
It is possible that you may have funds in the redraw facility attached to your loan. If you have been making extra repayments towards your loan, there could be extra money in your redraw facility which could assist you in meeting your regular monthly repayments.
If you have borrowing capacity and equity in a different property, such as your home or other investment property, you may be able to use the redraw facility on that instead.
Look for government support
During this time many governments, both state and federal are offering support in order to help the country get through the pandemic. Look to see what options are available in your state. The Queensland Government, for example, have been offering tax relief on land tax. This support can go a long way in keeping your investment on track.
Take a mortgage holiday
This is a last resort option. A mortgage holiday is good if you are struggling in the short term to meet loan repayments, however, it doesn’t mean you have complete freedom in meeting your mortgage payments. Any payments missed are added onto the loan for you to repay later. Sometimes this could result in higher repayments. It is a strategy which you should tread carefully around and only use if strictly necessary.
It is important that you talk to your accountant in regards to the performance of your rental property during COVID in order to determine the right course of action for your unique situation. Once you have done this, discuss with your property manager what steps you are going to take in order to reduce your costs, especially if this involves your tenants. If you are looking at refinancing, or other options in regards to your loan, discuss this with your mortgage broker. They will be able to offer you the best advice in regards to securing the lowest repayments. For further advice for managing your investment property during COVID, come have a chat with us.