What you can do with lump sums of cash?
07 August 2019
Having access to lump sums of cash opens the door to many possibilities, but alas this almost never occurs. Like your tenant, most jobs pay you weekly, or monthly and saving is hard. Unless you’re a high roller, or you’ve won the lottery most Australian property investors have simply worked hard to buy an investment property as part of their retirement plan. So it’s no surprise many people don’t know what to do with lumpsums of income when they suddenly have access to it, especially with interest rates so low and money in the bank no working as hard as it should.
Lumpsums of income can be powerful if you use the opportunity wisely. Here are our top 3 ideas, which obviously will vary depending on your own personal circumstances.
- Consolidate your debts
The switch from ‘interest only’ to ‘principal and interest loans’ has created a big hole in the monthly budget for a lot of Australians. As a result, many Australians have seen the balances owing on their credit cards and personal loans creep up, often without even realising it. This is understandable, as it can take time to readjust the monthly budget and get used to the higher principal and interest repayments. Given the average credit card interest rate is about 17%, paying off any expensive credit card debt and wiping the slate clean is always a good starting place. This can have the added benefit of reducing your chance of missing a monthly credit card payment and improving your credit score, which ultimately can even save you money on your regular property loans.
- Reinvest in your existing investments
Whether it’s a new coat of paint, brand new carpet or a kitchen makeover, it is important to invest back into your investment property, if you want to maximise your rental return. While this does come at a hard cost upfront, often the return you can make is well worth it. For example, freshening up with a new coat of paint and bathroom renovation may cost $10,000, but if you are able to make an extra $50 a week in rent, that’s an extra $2,600 in rent each year, which is a 26% return per annum on the cost of the renovation. Try getting 26% year after year in the stock market!
- Take control of your finances and your future
Have you ever tried getting a business loan? Or borrowing money to help one of your kids with a deposit for their first home? If you have, you’ll know that all these things come with a lot of strings… by using the lumpsum to take control of your finances without involving the bank, you will have control over your future.
While these are just a few ideas, the other hard part can be getting access to large lump sums of cash. This is where FutureRent can help! FutureRent gives landlords early access to up to $55k in rent upfront, so you can do all these things, without the need to sell a property or borrow money.
Don’t forget to spend it wisely!
Who is FutureRent?
FutureRent gives landlords flexibility, with early access to their rental income. Find out more about FutureRent here.