Every successful business has a budget that helps determine spending and can be used to measure success. A good budget is reviewed annually, but can also be adjusted as needs be during the year. If you are not using a budget to measure and track performance, its difficult to tell just how you are going.
If you are a property investor, you will know that across the year there may be some unforeseen circumstances that can have an adverse effect on your bottom line. While you can’t predict the future, you can make plans through a budget to ensure that any adversity is minimized.
The easiest way to begin your budget is to start by listing your fixed expenses; these are likely to include mortgage repayments, insurances, body corporate fees and rates. Other expenses which will be variable could include utilities, gardening fees, repairs and cleaning. This will depend on whether your property has been tenanted for the twelve months of that particular year.
In measuring the performance of your investment, you need to examine what the investment property is generating. To do this you need to consider the cashflow. What is the income source of the property – this will be on the monthly statement from the real estate agent managing your property.
Other income sources from your property will include the mortgage reduction; every month you are reducing your debt therefore increasing your equity. This needs to be added into the calculation. There are also tax benefits through negative gearing that need to be taken into account and, of course, your property is appreciating, so there is gain here that contributes to the success of your investment.
Accrue Real Estate are not financial advisors but the partnerships we develop mean our clients not only receive premium property services but have access to professionals with knowledge and experience in the financial aspects of investment property. If you are serious about property investment, Accrue Real Estate can assist you.