You're going to have plenty of questions. Here, I have dealt with some of the common ones I encounter.

What if I lose my job or my income reduces?

Job stability, and the certainty of income that comes with it, will always be a risk to be managed when it comes to investing. For some, the risk is very low; for others in more volatile industries and professions, it's higher.

When investing in property, we need to balance cash flow and growth. Good properties grow in value and provide cash flow. You can't have one without sacrificing the other. If you want to increase the growth potential, you might buy a bigger block of land. The land is what appreciates, so the bigger the land size and content, the stronger the growth you're likely to achieve. The sacrifice comes in the area of cash flow — your rental yield might be 3.5 per cent, compared with 4.5 per cent you'd be achieving on a smaller block. In practical terms, that could mean forking out $150 per week to fund the property, instead of receiving $50 a week in positive cash flow.

If you're particularly sensitive or concerned about losing your job, you should aim to invest in a property that is skewed more towards cash flow than growth. In many ways, that's the opportunity in front of us today. Low inflation globally means we're very likely to see low interest rates for a few more years, potentially right through the next decade. There are plenty of opportunities to buy properties that will grow in value, as well as cash flow neutral, or even cash flow positive, options.

The other sound strategy is to enter the property market with a ‘buffer’. As a rule, I try to have three months’ interest and holding costs (water and council fees) set aside for each property I own.

One other safeguard involves insuring your income through an insurance broker. Companies such as Zurich offer competitive rates, guaranteeing personal income in the case of job loss or, worse, permanent disability. But this isn't for everybody because essentially what you're doing is staking that you will be met with some level of misfortune.

That's the way I've supported my investment portfolio, but as we've already established, I'm pretty conservative in my thinking. For others, insurance is a waste of money, but part of the process of investing is understanding the risk and how that marries up with your personality.

What if I can't get a tenant for my property?

The easiest way to ensure your rental property is always tenanted is to buy the right property! In this respect, what you are looking for is fast-growing areas with a population growth of between 6 and 10 per cent per annum. These expansion corridors might have 30 to 50 people migrating to the suburb each week, ensuring demand for housing.

You should also ensure that the rent for your property in affordable areas sits at or below 30 per cent of the median household income in the area in which you invest.

Additionally, by buying new property, you have enhanced prospects of finding a tenant, at least for the initial five- to 10-year period, when cash-flow is likely to be most sensitive.

Many developers or investment companies also offer a ‘rental guarantee’ where they will pay the rent on the investment property for a period of time, in many cases up to a year, if you don't find a tenant straight away, which gives you time to build up that savings buffer even further while looking to secure a tenant.

One final ‘micro’ piece of advice. So many investors don't want tenants who have pets. The property managers I've worked with have data that suggests more than 50 per cent of households have a pet. If you're excluding pet owners, you're effectively halving the size of the potential rental pool, or doubling the risk of not being able to secure a tenant! As a landlord, you collect a bond for any damage caused, and your insurances provide extra coverage. Banning pets? Not as bulletproof in my humble opinion!

What if interest rates increase?

Interest rates will increase where we have inflation. The good news is that when we have inflation, rents will increase too. Therefore, any increase in interest will at least partially be offset by an increase in rent. Another failsafe I use is to make sure that even if interest rates rose by 2 per cent, the cost of maintaining my properties would still be less than 10 per cent of my take-home pay.

If that's the case, you've covered your downside. Not being able to cover the additional financial impost, particularly for just a short period, in my mind points to a different problem. It's likely you have a problem with your budgeting. Start by getting that under control.

A good mortgage broker will help you run through these sensitivities and concerns.

What if my loans go to principal and interest?

The answer to this is much the same as the answer above. The key is to make sure that the cost of holding the properties is still less than 10 per cent of your take-home pay.

Realistically, I think this risk is lower than the risk of interest rates increasing. Banks typically won't want you paying off any investment debt until you've paid off your home debt. Your fall-back scenario may be to take all your loans to the one bank, something I generally try to avoid. For me, that's a last resort. Others may be more aggressive in shopping their banking around.

It simply doesn't make sense to pay back good debt (debt that is deductible and generates an income) when you have bad debt (non-deductible and non-income-producing debt), such as a mortgage on your principal place of residence.

Is it realistic for property to increase in value like it has in the past?

No-one has a crystal ball. However, in my opinion, for the foreseeable future, the median house prices in most Australian capital cities will continue to double every 10 years, even with inflation as low as it is. We are a growing population and I'm not predicting that growth to subside anytime soon. Additionally, we've got an ageing population, we're a country that punches well above its weight economically, and we're an attractive proposition for overseas investors. All of this adds up to continued strong demand for property, in the right places of course.

In 2009 when I started in the business, I remember experts stipulated there was no way the median house price in Sydney would go above $600 000. It was $544 000 at the time. At the time of writing, the median house price is $1 015 354, an increase of almost 87 per cent. Demand for urban property will always be strong. People want to live close to the CBD, but common sense dictates there's not enough room for everybody. The blocks get smaller and smaller, but eventually, urban sprawl must come into play.

The house you bought for $544 000 has doubled because in that decade block sizes got smaller, and housing moved further away from town. That house you bought for $544 000 is worth well over $1.2 million today. The median house price in 2020 was $1 015 354, but that house is on a smaller block of land, and likely further from the CBD than the median house that you bought in 2009 for $544 000.

Having said that, the ‘property market’ is made up of many different ‘sub’ markets, offering multiple types of investments. Some properties will perform better than others, depending on the economic climate. But historically, you can rely on land in high population growth areas consistently doing well.

Median house prices doubling every 10 years might be the benchmark, but even if there's growth of 50 per cent, it's still a highly desirable result. One property would help you turn $75 000 into $300 000 or $115 000 into $350 000. As you know by now, your investment does even better if you compound it.

What if my tenant leaves suddenly or damages the property?

There are multiple measures you can take to protect yourself against this type of scenario. The first is to collect a bond equivalent to a month's rent. The second is to insure the property, and the third is to take out a landlord protection insurance policy.

My conservative nature points me in the direction of investing in a good rental income protection policy. Terri Scheer and EBM are generally regarded as the leaders in this field. They will cover you for tenant damage and loss of rent in the case of your tenant vacating prematurely. In some instances, Terri Scheer will even pay you the rent from two weeks of the tenant stopping their payment. The policies cost around $300 per year — a small sum for significant peace of mind. During the height of the COVID-19 pandemic, Terri Scheer did stop offering this policy option for a short time. However, they wrote to all their existing policy holders, confirming they would be honouring their policies in the event of tenant default as a result of the pandemic.

Having a good property manager is also critical. Most charge between 6 and 8 per cent of your rent to look after the property. In my experience, you get what you pay for. I'd encourage you to pay 8 per cent — this will point you in the direction of somebody who is experienced and proactive. The additional outlay of roughly $10 per week (all tax deductible) is money well spent. But be very clear about your expectations. Make them work for their commission. They should inspect your property every three months and provide a monthly reconciliation of your rent payments. Staying on top of matters mitigates potential issues with tenants.

Won't the banks stop lending me money at some point?

This question has to be answered in two parts.

The first part — bank policies — is out of your control. The banks will stop lending you money when they deem you can't service the debt. As a result of the 2018 Royal Banking Commission, they're conservative. They will always work out — in considering whether to lend you money or not — whether you can service the debt not just today but in the event you had to pay principal and interest at higher rates than today's. If you're going for a 3.5 per cent interest-only investment loan, they'll make sure you can service a 5.5 per cent principal and interest loan.

What's more, most banks will even assume you only get 50 per cent of the rental income for extra conservatism.

Finally, they will scrutinise your expenses and assume you spend whichever is the higher: your actual expenses or a calculation called the Household Expenditure Measure. Yep, no extra points for being a good saver, unfortunately.

The second part of the answer to this question is the solution. Banks are in the business of lending money, but don't like to lend to investors when they've got a big home loan. The quicker you get your home loan paid off — which is non-deductible debt anyway — the more money the bank is going to lend you for investment purposes.

To help with this, make sure you set up an ‘offset’ account — that is, a savings account that sits against your home loan and offsets your interest. For example, if you owe $500 000 but have $100 000 sitting in an offset savings account, you only pay interest on the difference. So, in this example you would only pay interest on $400 000. That will save you thousands over the lifetime of a loan, and can help you pay back your loan years earlier!

One last thing. If you get stuck, you may have to get inventive. Borrow or pool resources with a family member or trusted friend. A lot of parents team up with their kids. Good for parents who have ‘lazy equity’ and not enough income to keep buying. Good for kids who have the income but not enough cash or equity for a deposit.

What if the government abolishes negative gearing?

This was a topic of great debate during the 2018 federal election. The Australian Labor Party had the abolishment of negative gearing as one of their key electoral platforms. Exactly what role it played in the ALP losing the election is difficult to say, but I believe wholesale removal is unlikely.

At worst, it might at some point be scaled back (when there's a change of government) but it will not be retrospective. If you are already benefitting from a negatively geared property, this will continue. Any changes will only relate to investment properties purchased after the change is brought in.

Coupled with this, in times of record low interest rates, the cash flow benefits derived from negative gearing are not that significant. I'd suggest in the post-COVID-19 era, future federal governments will have far more pressing matters to address.

What are holding costs?

I have referred a few times to holding costs, which can make up part of the purchase costs when buying property.

Here are some of the costs you might incur:

• Agent management fees: a property manager will charge you 6 to 8 per cent of rent collected as a fee for managing your tenant for you, as well as a fee each time they let the property. This is money well spent given that they also conduct routine inspections every few months and ensure you don't have to handle all the day-to-day communications with your tenant.
• Rates: council will charge you rates for managing the sewerage, waste and water services at your property. Some councils provide all three services; others provide some and engage third parties for the remainder. The fees are charged based on the value of your land (in the case of sewerage and waste) and usage (in the case of water).
• Insurance: it's vital to have insurance over your home, as well as the contents (for owner occupiers) and landlord insurance (for investors).
• Maintenance: this involves any minor repairs or maintenance not covered under insurance or builder warranties (in the case of a new home). Maintenance will be higher for older properties than newer ones, and can be a big variable when it comes to cash flow. In the first 10 years of a home's lifetime, I generally budget $500 per year for the first five years, and $1000 per year in years five to 10.
• Body corporate fees: these are fees charged to unit and townhouse owners. They are for repairs to common property and building structure. You typically don't pay these fees on freehold house and land. They can be anywhere from $2000 to $5000 per year.

Shouldn't I be diversifying?

A lot of financial advisers would say that diversifying your investments is a good idea. I don't disagree, however I don't do that myself. I have my superannuation invested with an industry fund at the direction of a financial planner, however choose to hold most of my personal investments in property (you might recall I always have three months' holding costs in cash).

My rationale is that my investments are diversified because I own property in different areas and markets that experience growth cycles at different times, and that provides me a degree of diversification.

Most importantly, however, I find it challenging enough to be across what's going on in the property market and my property portfolio. I'd rather have a good handle on my investments in one type of asset than spread myself thin and get average results across multiple asset classes.

Having said that, I have seen a lot of people do well with diversification and found it to be anxiety free. In almost all instances those people have successfully 'leveraged' the advice of mentors and/or professionals to help them make their decisions. If you're wanting to diversify, I'd recommend you do the same.