Managing risk: strategies for successful property investment

Successful property investing is all about mitigating or avoiding risk so that you can maximise your investment return. There are some proactive and crucial steps you can take to ensure low-risk property investing.

What are the risks of investing in property?

The main risks and factors that worry potential property investors are explained below, along with strategies to mitigate or avoid each one.

Economic risks

Economic risks of investing in property include:

  • The potential for interest rate rises that will increase loan repayments.
  • Economic downturns that can lead to a decline in tenant demand in particular locations.

How you can minimise economic risk

You can’t avoid economic risk, but you can minimise its impact by:

  • Getting expert advice on property finance.
  • Buying in strategic locations with higher potential for growth, driven by population, employment and infrastructure. These areas are less susceptible to economic downturns.

Market fluctuations

Market fluctuations affect property values. Even though property prices in Australia have a long-term growth record, there are times where they can stagnate and even fall in certain markets.

How you can minimise market fluctuation risk

You can’t avoid market fluctuation risks, but you can minimise their impact by buying property in strategic locations and diversifying your investments, for example, by buying different types of properties in different locations. Additionally, when you purchase is just as important as where you choose to invest. Look at locational price movements and avoid buying at peak of the market with inflated prices, driven by demand. Utilise independent research before you invest to make informed decisions.

It’s also important to take a long-term approach to property investment to ride out any market fluctuations.

Legislative or regulatory risks

Legislative or regulatory risks in property investment include any changes to property, rental or tax laws that could negatively impact your returns.

How you can minimise legal or regulatory risks

You can’t avoid these types of risks, but you can minimise their impact by getting expert advice before you buy. This is especially important if you are buying in a market where you aren’t familiar with local laws and regulations. For example, in a different state, city or council area.

DPN provide a guaranteed minimum rental yield on their properties for peace of mind.

Vacancy risk

Vacancy risk is the risk that your property may be unable to attract tenants for an extended period. Vacancy periods reduce rental income. Even though we currently have a rental housing crisis in Australia, tenant demand can fluctuate in different markets at different times.

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How you can avoid vacancy risk

You can avoid vacancy risk by buying an investment property through DPN, our investment properties are strategically built in high-demand, growth locations.

In addition, we also provide a guaranteed minimum rental yield on all our properties to give you peace of mind. This guarantee includes 92% of your base rental estimate if your property remains unrented 6 weeks after handover.

Tenant disputes

There is always a risk of tenant disputes with any rental property, but the good news is that these risks can easily be minimised.

How you can minimise tenant disputes

The easiest way to minimise tenant disputes is to hire a proactive property manager like one of our experienced team at DPN. We will carefully screen your tenants to ensure that they are high quality and will professionally liaise with them on your behalf throughout their lease term.

Property repairs and maintenance

Property repairs and maintenance can be a significant risk on older investment properties.

How you can minimise property repairs and maintenance risks

The best ways to significantly minimise property repairs and maintenance risks are to:

  • Buy newly built investment properties, which offer fixtures and fittings with warranties and, being new, lower the risk of repair and maintenance costs in the short and medium term.
  • Appoint a professional property manager, such as DPN, who will provide accurate and timely issue reporting supported by a quality repair supply chain. Further to this, your property manager will also ensure the property is well maintained, regular inspected and that quality tenants are selected on your behalf.

Environmental risks

Environmental risks of property investment include natural disasters like floods, cyclones or bushfires.

How you can minimise environmental risks

You can minimise the environmental risks of your property investment by buying in low-risk areas. For example, none of our DPN investment properties are built in designated flood zones or other high-risk areas for natural disasters. Having the appropriate insurance coverage is critical. Common insurance types include Building, Contents and Landlord insurance. Working with an expert team, such as DPN can help guide you on the right cover for your needs.

Key risks to mitigate

Like any investment, there are potential risks with property investment. The main risks include:

  • Economic risks
  • Market fluctuations
  • Legislative/regulatory risks
  • Vacancy risk
  • Tenant disputes
  • Property repairs and maintenance
  • Environmental risks.

The best way to minimise or avoid these risks is by getting expert advice that’s backed by research. Our professional team at DPN can provide you with advice on all aspects of strategic property investment, finance and management.

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