Watching The Block a few weeks ago was a fairly grim experience. Fact - Melbourne’s property market is struggling a little at the moment. Even though most (all??) of the properties sold afterward, it was pretty clear that potential buyers are wary and holding their cards pretty close to their chest at the moment.
I read in the paper that the average purchase price of the homes on The Block including stamp duty was apparently $950,000.
Major renovations including stumping, plumbing and re-wiring etc averaged $300,000 per property. With cosmetic renovations averaging $100,000.
According to what I was reading, the average total cost per house was $1.35 million….
Now it was a TV show, and I really have no idea of how much of their own money contestants had to spend over and above prize money, all I know is that when it comes to property these days we’re dealing with pretty big numbers.
Along with the big numbers, tends to come the big loans.
We prepare hundreds of tax returns at The Hendrie Group, and we’re always surprised by the number of people with rental properties, but no income protection insurance.
A rental property is a huge investment in your long-term financial security, and no one wants to be in the position of having to sell in a downmarket because you’re unable to work for a while. It makes sense to spend a comparatively small - and tax deductible - amount to protect yourself.
Something I’ve always told my clients is that when it comes to property, if you need money quickly, you can’t just sell the bathroom, you have to sell the whole house. And times like these are a good example of why you don’t want to be forced into a position where you have to sell.
I have a very close friend who was diagnosed with breast cancer on Melbourne Cup Day last year, and she still hasn’t been able to return to work. And it looks like she won’t be able to go back to work until about June next year – that will be almost 2 years! Imagine two years unable to work. Fortunately she does have Income Protection, so can concentrate on getting well without having to worry about being able to service her debts, let alone her day-to-day living needs.
My advice to anyone that owns a rental property (or frankly, anyone earning $40,000 or more) is if you don’t have income protection cover, then you should explore your options. At the very least, you should be in the best position to make some informed decisions about your financial security.
Talk soon,
C
PS. I have oodles (technical term) more information on income protection insurance if you’d like to know more. Just email me at askcaren@hendrie.com.au.
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