Hi Guys,
I was wonering, if you were a small time investor, and there was a property crash, what would happen?
Suppose you had loans, and currently had posotive cashflow from the properties?can someone pls help, i no it may be an easy question for some ppl!
Thanks
Karan[
]*****
Please reply to [email protected]
*****Karan,
In a property crash, you should “duck and cover”. That was the advice given by the American govt about if a nuclear bomb was dropped, and it still holds true today!
Also- in a property crash- trick is to not hget in over your head. If people are worried about their situation, sell, sell SELLLL!!!!!! (panic is a good thing)
kay henry
And send Kay a private message about your panick sale as she is looking to buy[:p]
Leigh K[
]Carve your own path and lead the way …
hehe Leigh, I bought two places in 6 months last year- don’t pressure me! :+P
kay henry
Karan, it will become a problem if you cannot find tenants.
If there is a property crash, that suggests that people are not buying, and therefore there should theoretically be less investment properties, so in time there will be more demand for rentals. If you keep your tenant, you shouldn’t have a problem. If vacancy rates fall, then rents could go up, and you could be in an even better position!
Cheers
MelHi Young Learner,
You can always refinance your loan, prepare to have some liquidatey in cash money that could be tied into other investment vehicles.
Or you can hold the ride out, there are alot of people who heavily negative gear, so to them a small increase in a +ve cashflow property or out of pocket expense, will not worry them to much as what they would normally be exposed to in a heavily -ve geared property.
Cheers,
sisYou may not be able to refinance your loan if the value has dropped. If you think there may be a crash comming up then prepare now by building up some reserve funds.
Also it is possible that the lender could ask you to pay down the loan to keep the lvr at the same level incase of a drop. I have seen them do this with rural properties. It is like a margin call on shares.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Even if your properties are cash flow positive there is nothing to say that they will move up in price by say seven yrs time, they may go down, it`s fine if you want the extra work of rental properties for a few extra bucks a week, but at the end of the day anything can happen in your life, seven to ten yrs is a long time, personally I think it`s not a good idea for most to have more than a few rentals, they can very quickly become CF-, then you may lose your job, get ill whatever, it depends on your circumstances, lastly don`t get excited chances are if you recently bought investment property in Melb or Sydney your prospects may not be too great.
If one is worried at anyone time, sell down till you reach the sleeping time level.
Ways to protect oneself ?
Perhaps the solution may lie in getting a line of credit, drawing the money and thence use the money
to put into an offset account.Make sure that the bank cannot offset the money in your account against the outstanding loan.
In time of uncertainty place the money elsewhere in an account.
Would the above solve the problem somewhat ?
Anyone ?
Pisces
Some ideas for the crash, if it comes (although anyone could have a personal crash, so it’s relevant anyway):
* get income protection insurance in case you lose your job;
* get landlord’s insurance in case your tenant skips off or trashes your property and it becomes untenantable;
* don’t be too “rent reliant”. Try to keep your mortgage within limits so you can pay it substantively out of your wages. The tenants’ rents will then be used to just pay off the properties more quickly. You can then redraw for a rainy day etc.
* but seriously- think of selling one of your properties- the one that might not fit into your investment plan (as in, isn’t pulling its weight) before the market really chills. Currently, auctions have slowed, but that isn’t surprising, given new regulation and that the boom has peaked). Auctoin results don’t mean much for most people- most would sell as private treaty.
kay henry
Hi Karren,
Have finance available, not necessarly cash, but money that you can easily access to pay for a month or so in rent. If some of your properties have equity there, you might want to consider refinancing your loan. If worst comes to worst, sell one IP to cover the costs, and try to ride it out.
Hope this helps
Cheers Matt
“If you do what you have always done, you will get what you have always had.”
“Isn’t it time for a change?”
Hi all – I am new to this as well, but I read in the posts here that it may be possible to buy using a trust with 40% down so that you do not have to sign as a personal guarantor. i.e. the lendor feels that it has some protection in the event of a market turndown, as 40% is a long way to drop, and if you were unable to make your payments they should have good chances of recouping their loan through market sale.
I am looking to use this as a strategy as that way my personal liability would be limited to 40% of the value of the property, and it would have been paid off upfront (no worries of the loan being called in).
This would a) help me sleep at night and b)a higher deposit means the loan will be paid of faster.
what do the more seasoned investors think of this strategy?
kurious[
]Our plans miscarry when they have no aim. When we do not know what harbor we are making for, no wind is the right wind.
~SenecaFinance guys and gals, what about non recourse loans? Do you deal much with them?
I think the LVR is about 65%? I’m thinking this is something similar to what kurious is saying?
Cheers
MelHi Mel,
Have been looking at putting larger deposits into the deals, but i dont see any benefit, as im tying up to much funds and have less control of them that way. Though another option is, get someone to guarntor your loan and still be able to get servicibilty at the same time.
Cheers,
sisIf the values should drop for any reason rest assured it wont be permanent. History tells us this.
You will only realise any loss if you sell.
Hold and wait and even look to buy is my plan in such an unlikely eventuality.
Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
i guess what we are looking for is a good strategy to help us hold on when the market falls. ideally would be a non-recourse loan at fixed interest rates…
~~~
Our plans miscarry when they have no aim. When we do not know what harbor we are making for, no wind is the right wind.
~Seneca>>i guess what we are looking for is a good strategy to help us hold on when the market falls. <<
Some prozac perhaps ?
Pisces133
There are times when one just cannot borrow money and so no refinance possible.
If thing are very very bad, hope that it will shortly become very very very bad so that the government may decide to call for a moratorium ?
Or having some of one’s money either in the share amrket or perhaps govt bonds ?
Then again who has money to spare for that ?
Pisces133
Hi Guys,
Look, it’s early in the morning for me, so I may be a bit more critical than usual. However, peoples don’t forget your due diligence before you commit to anything.
During your pre-purchase research don’t forget to consider worst case scenarios as well as best case.
Before I take out any loan I like to work out repayments at 10%, if I’m not comfortable with this amount, then it’s no good for me.
(My first HL was at 13%, I thought that was good, as was coming down from 17)
Basically cover all your bases, review your financial situation and make changes NOW
Cheers,
Sue []“Be careful not to step on the flowers when you’re reaching for the stars”
Lets put this in perspective. If banks start to foreclose on people who have negative equity because of falling prices then this will only fuel any falls tenfold. This means the banks will be selling an asset worth even less than if they hadn’t started foreclosures.
It will also spell disaster for many families in most major centres accross Australia.
I can’t imagine it happening or being allowed to happen by either the government or the industry.
Just my opinion.
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
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