Hi,
There is one thing that concerns me with gathering a portfolio of properties, particularly in these times of oversupply of rental properties. Say, for example, yuo have accumulated 5 IP’s, all rented and, suddenly, four of your IP’s become vacant at roughly the same time. In an oversupplied market with the potential of not being able to rent them out for months, what do you do?..how do you financially cope with this eventuality?[?]Hi banner
I guess it is just part of the risk of property investing. Therefore effective risk management is the key – this might involve holding some cash reserves as a buffer.
Steve’s book talks about the importance of the tenants in property investing. I think his point is that the better the situation is for the tennant, the less likely they are to want to leave, and the investor therefore has less risk from that perspective.
Sorry this doesn’t read very well, but i’m sure you get what i mean.
Matt
Hi banner a fair Question.
i’ve got 20 properties and they are nearly always occupied. i have only one place vacant the tennant moved out last week. I’ve had 10 of these properties for over 5 years and i’ve never had more than 3 vacant (i can’t even remember that). Usually i have none vacant. Because my properties were cash positive i could have 30% vacant and still not be taking money out of my pocket. It appears to me that the high vacancy rates are in certain Areas. Even in Melbourne for instance some parts have high vacancy rates and others very low. My properties are in Regional cities and towns and there appears to be low vacancy rates there.
regards westanThanks for your input. It helps put things in perspective when you’re a worrier! Another question I have – I’m preparing to buy into regional nsw and Qld. Many of these homes that are +ve are oldish and therefore raises the question maintenance. Any of you guys out there with big portfolios, do you find you have hefty maintenance bills?
Hi Banner,[
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If you diversify your portfolio and invest into different areas, risks are minimized, whether or not a mix of positive and negative geared investments are used.
One area of Australia will always be at a different part of the timing cycle to another.
Research together with a SWOT analysis should be carried out prior to the purchase of each property.
This will determine the location and type of investment. When you want to add an investment to your portfolio, you just repeat the process. As the location will be different with time, the portfolio will result in being diverse.Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi Guys
Banner in regard to maintenance. i had one hot water system go in 4 years then in the past 2 i’ve had about 5.
If these houses are older then by doing mainenance will it add to the value? Sometimes a coat of paint which would cost say $500 (if you do it) can add 10,000 to the value of the property. I’ve had properties that i painted inside and new carpet that cost about $4,500 but i put the rent up $20pw so it didn’t hurt as bad.
But check the expensive things like stumps etc.
Or facture all these in when you work out what to pay for the home.
regards westanI know what you mean bout no renters. We have just built a 4 bedroom home in a coastal area of nsw. We were told $330 week rent – no worries. It has been on the market for 7 nearly 8 weeks – no prospect of any renters. The house is immaculate and brand new but property manager says there is NOW no demand at higher end of market. We’ve reduced rent to $295 week and even offered it to someone who was remotely interested at $280. PM has said we can list with other agencies. Our property that was looking OK offset against our incomes is now looking dismal. We’ve even thought about selling but we’d incur CGT in 1st year. We’re depresses about 1st entry into IP market. We’re hoping maybe to but some cheapies at the lower end of the rental market that maybe easier to rent. Are rents falling out there as property selling prices are rising?
Propertyannie
It is worthwhile to have a ‘safety net’ in my case it is a line of credit that can be drawn on used in these situations. I would think that usually it would be for a short time, i.e. how many of the properties out of the portfolio will not be rented for a year. Therefore you just need something to bridge the gap if required.
As all the properties have a +ve cashflow it would probably not be required, as the cashflow would cover most of it.
There is nothing like have a backup plan incase things get pear shaped
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