Interest rates have increased once again. Although your property is still growing in capital value at a greater rate than interest, there is the immediate effect on cash flow.
Here are 9 tips for how to manage the cash flow shortfall created by additional interest.
1.
Think before you act - A quarter percent interest increase will cost $4.80 per week for each $100,000 borrowed. Calculate the additional cash outgoings caused by the new interest charge. Is it a serious effect on your cash flow or can you manage it?
2.
Increase rents as soon as practical.
3.
Salary earners should apply for an amended Income Tax Withholding variation.
4.
Review your budgets – Are there any spending items which can be eliminated or deferred?
5.
Fix part or all of the interest on your loans to help with future cash flow planning.
6.
Seek opportunities for additional income from other sources.
7.
Negotiate a better interest rate with your current banker/financier.
8.
Increase your current loan to cover the interest shortfall for at least a year (and don’t forget to allow for say another 2 interest rate rises as a precaution)
9.
Consider Refinancing with a more cost effective lender.
Disclaimer: The information, statements and opinions expressed on this article are only intended as a guide to some of the important considerations to be taken into account relating to property investment. Although we believe that the statements are correct, they should not be taken to represent accounting, taxation, legal or investment advice and you must obtain your own independent advice from an appropriately qualified professional.
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