What to do in a property crash

Simon,

It has happened right throughout this century in various places in the world. e.g. It happened in the UK in the 90’s.

There is no reason to believe Aus is immune!

My opinion.

Wayne

http://www.tradingforaliving.info

We may be bantering around but how to protect oneself is a serious question for all of us.

In the past I have been committed to the hilt meaning that I depended on the income from rentals this month to pay for the interest the same month.

That is I had no spare money to tie myself over for even one month.

And that wasn’t even in a serious downturn.

Things can and do go wrong in life and a tenant’s problem usually does get passed on along the line to the lessor.

So people who suggest to have at least a three months commitment sitting in a bank account as a buffer do give some good advice there.

But advice is advice and, unless one heeds the advice,
chances are that somewhere along the way trouble will be lying in wait, ready to pounce on us.

It would be interesting to get some statistics to see how many people on this website with investment properties actually do have some back up moneys sitting in the bank.

Remember, whilst today one can rely on an overdraft to tie one over, there may be times that the bank itself is short of cash and eventually calls up the Lines of Credit.

So where does one go from there ?

Pisces133

>>interested in hearing from the oldtimers who experienced 15%+ interest rates… how did they hold on? <<

With great difficulty.

Fortunately the properties were returning 15 or 16% and the interest rates at 16% were just covered witha little bit left over to live.

There is no guarantee that the same interest rate regiment cannot happen again during our lifetime no matter who says it cannot.

Anything is possible.

A healthy dislike to having debts has since appeared.

Pisces133

kurious, during the high interest rate times, I earned 18% interest on money i had saved. not a high interest mortgage- but high interest savings!!! :o) Perhaps a good strategy when IR’s go higher – like really high- is to have money to invest- pull out of RE- until the rates fall again.

I had the money invested at 18% for one year, and then I decided not to reinvest- coulda got 16% over 5 years on telecom bonds- but I thought it was too small interest rate after getting 18% :+/ I woulda been rich by now had I done that

kay henry

Hi Kay – that’s where I am now! cash rich and asset poor. the only thing is I am getting less than 1% interest on money in the bank as opposed to the fabulous figure of 18%… hence my desire to get the money working a little more effectively… without setting myself up for a big fall in the process.[]

not sure if you’ve heard about robert prechtor and the elliott wave theory? essentially he feels the world economy is in for a big fall, and the best thing to do is keep all yuor money in cash until the market reaches bottom, at which point you should step in and BUY BUY BUY!

my feeling is he is probably right (based on my own further reading & research), but that surely there are pockets of opportunity to get in to now. making less than 1% just isn’t cutting it.[!]

would like to start out cautiously buying a few IP’s without too much exposure while keeping some living expense emergency money in the bank in case it starts to get hairy.

~~~
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

if this occurrs, there should be a reduced supply of rentals leading to rent increases. residential property will come to be valued in terms of yield just like a commercial property. interesting. probably how it should be anyway.

those doomsday prophets have been around for years. a bit like the theory a few years back that commodity based economies were finished and we were in the golden era of IT. China’s apetite for raw materials will knock that theory on the head.

I suppose one of the things we should try to do (although when you’re buying and buying there never seems to be much spare cash) is to have a stash of cash (or unused credit) for that rainy day when you have 2-3 months of no tenant, a $4,000 bill to re-wire the house because you got hit by an electrical storm or in my case, a good sense of humour when you happened to have a rental property which was hit by the 1 in 100 year flash flood which hit Melbourne last November….disgruntled tenant who has not paid rent and is being evicted, very slow assessors etc. Preparation is the key! Good luck.