Owning an investment property comes with financial risks, but there are steps you can take to minimise impact on your wallet if things go wrong.

Some of the common worries many property investors fret about, is that of having to find new tenants on a frequent basis, tenants not paying rent on time for mortgage repayments, and will the tenants look after the property without causing unnecessary damage.

These may be valid concerns, but as an owner you may be placing unnecessary worry on yourself because a good risk mitigation strategy will allow you to put safeguards in place in-order for you to feel protected.

Truth be told, you can never completely eliminate risk, the reality is, there are factors associated with property investment which will always be out of your control.

However, you can reduce potential financial stress by identifying risk events and working out ways to mitigate them. Here’s how you can tackle the big three concerns associated with investment properties:

1. Stable rental income

Downgrade this risk by buying property in areas that have a strong rental population, this information is available from the Australian Bureau of Statistics and real estate data providers, such as CoreLogic.

Once you have the information on hand, speak with a few local real estate agents and get their input on current demand and vacancy rates.

And if you already have a property, the most important protection you can put in place is engaging a qualified and experienced property manager whose job is to ensure your property is tenanted year-round at competitive market rental.

2. Interest rate changes

Yes, the rates have been rock bottom for so long now that you’d be forgiven for thinking this is the norm. A smart mortgage holder would not make this mistake.

Once upon a time, the Reserve Bank dictated interest rates movements and the lenders obediently followed. Those days are long gone, it’s individual lenders who now decide what and when their will change the rates they offer based on their funding cost and shareholder returns.

You may have no control over lenders cost and how much profit they need to generate for their shareholders, you can however control your own finances.

One of the first actions to take would be to create a cash reserve to buffer to help deal with any upcoming rate hikes. You can, opt for repayment certainty provided by fixed rate mortgages. To find out if fixing is right for you, read, how to decide between fixed and variable loans.

A word of caution, if you fix your loan for too great a period, you are most likely losing your biggest defence against rising interest rates, refinancing!

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3. Finding responsible tenants

That proactive property management professional you engaged to look after your investment property should be your first line of defence against trashy tenants. An experienced property manager should have checks and balances in place to vet out undesirable tenants.

Sometimes, the vetting process fails and this is why you also need landlord's insurance policy in place to cover trashy tenant related risk. If a tenant maliciously damages the property, your policy should cover you for repairs and loss of rent while the damage is being repaired.

It’s a worthwhile tax-deductible investment and it provides invaluable peace of mind.

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This article does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.