Be prepared: Cover your risks before it's too late

Yes, even if it’s for a couple of months. What happens if, like 2008, rentals have to be reduced to protect against the risk of keeping the property untenanted?

Most importantly, monthly expenses can be managed from liquid, short-term and debt funds (which have lower risks), and the rental income invested in a systematic investment plan (SIP) in equity funds, if it can help meet long-term goals.

In case the rental income stops, all that one needs to do is to stop the SIP

Depending on Rental Income
Individuals do not like cluttering their finances. So, we find people telling us that their monthly expenses are Rs 30,000 per month, and “not to worry, we have rental income of Rs 32,000 per month to take care of that”.

A few questions to ponder on: What happens if the tenant decides to move on, and the landlord cannot find a replacement?

Joint Verses Single Holding
Normally, one member of the family handles the finances. Do make sure that your bank accounts are in joint names (at least), and have a nominee in place.

If you have a single bank account, but suffer an illness or injury that prevents you from signing your cheques, you could have wealth, but no liquidity.

Similar is the case in mutual funds. A joint holding is recommended, along with a nomination, in this case too.

The Difference between Nomination and a Will
You need to back up your nominations with a will. After all, after the death of the investor, the nominee receives the amount as a trustee of the estate of the deceased.

The AMC (Asset Management Company) or the mutual fund is discharged from its duties by transferring the units of the deceased to the nominee, but the other heirs of the deceased can certainly make a claim on the proceeds.

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