I am wondering what I would do if I had 20 positive cf properties that became negative due to interest rate rises. In that kind of market I am guessing I would also be sitting on a capital loss as prices would have fallen alongside the rate rises.
Hi mondim,
We have about that many cf+ properties, so I will say what we have done and are doing.
About half are fixed at various terms.
No two loans expire at the same time.
About half are on variableAll are on P&I loans, (that are reducing monthly).
All have at least 20-30% deposit in them, some more.We are monitoring all loans on a regular basis, to make sure they are performing as well as they can be.
We are selling a few by the multiplication by division strategy if they are not performing as well as we anticipated, or have had a reasonable capital gain, and are not likely for another gain for some time.
Profits from these sales will go to reduce the remaining loans to a lower LVR, and to continue buying when the real bargains possibly come along.
Regards,
Del
mondim.
IR’s rise and fall, and CG comes and goes- probably the only two “constants” in the RE game
However… if you are heavily in debt, yeah, an IR rise is certainly going to impact upon your repayments. I personally don’t believe that IR rises should be borne purely by the tenant. Sometimes, we just need to cop it on the chin.In terms of capital losses on the value of IP’s… an IR increase does not really equate with CL (capital loss), but I have read in a few articles that, in the event of a downturn, some of the properties you are referring to, will be more vulnerable to capital loss.
The extra expenses from IR rises should always have other streams of income to cover them- for example, something like a wage.
kay henry
hi there
in reguards to interest rates rising doesnt the rents increase due to people selling and or investors pushing up the yield ?
how quickly can interest rates rise ?
However… if you are heavily in debt, yeah, an IR rise is certainly going to impact upon your repayments. I personally don’t believe that IR rises should be borne purely by the tenant. Sometimes, we just need to cop it on the chin.
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