We have just sold our family home for a tidy profit. I want this to be a launch pad for our next venture. Have come across this exciting positive cash flow investment theory. I’m getting quite excited!!! I have alot more research to do reading,seminars, time on the net etc…. Any advice on how to build our foundations would be appreciated.One question still nags me … what happens if interest rates go up 2,3 4 or even 5%. I would assume these investments are made with long term intentions. How can you protect yourself against a depressed property market and higher interest rates??? I’m not trying to bring anyone down I just need some reassurance before I take off.
Hi Toad,
Welcome to the jungle….err Forum!!! [lmao]
Congratulations on your sale!!!
One question still nags me … what happens if interest rates go up 2,3 4 or even 5%.
A smart investor should be able to weather such increases, and by ensuring that he/she does not over-extend themselves financially, such vast rises will be accounted for (but hopefully not realised)!!!
Hope that helps, and good luck,
Jo
Hi Toad
One option is to fix interest rate for as long a period as possible normally 5 years, you play a slight premium but if the investment still works you have 5 years peace of mind.
Unfortunatly still remember rates of 17/18 %
Regards
garrytas[email protected] Always have cashflow positive Tasmanian commercial properties
availableSpeaking for myself, me, personally, toad- hehe… couldn’t resist… [baaa].. interest rate increases of 5% would be difficult. I too remember when IR rates were 17%- fortunately for me at that time, I had money invested at 18%, so I was on the other side, but a 17% mortgage would have done my head in.
“That time of the month” (when the RB meets) can be stressful for investors, but generally, an expectation that IR’s might rise, is better than a feeling that they will never rise. Pay rises help to weather the IR storm, as does making extra payments. When interest rates lowered in the last decade, many people got ahead by keeping making the same payments as when IR rates were higher, therefore increasing their equity.
I always make sure I pay more on my mortgages than I need to, so there’s always extra money available.
IR rates are just another contingency in the RE game. I have the motto of “be aware but don’t obsess”. It keeps things in perspective.
kay henry
Poeple often remind me on the days of high interest rates.
Rembemer back then the average loan was under $100K.
If rates go up that high again with the average loan now 3 times as high then I think the fallout would be huge. I can’t imagine any government watching so many homeowners (voters) in places like Sydney getting kicked out of their homes. The plunge in values alongside would also be frightening.
So I think high rates today would be considered to be perhaps around the 10% mark.
Just some rambling thoughts here – no professional advice intended!
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
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 would be very wary of the postive cashflow strategy now. When Steve did it, it was a totally different market. He was getting good cashflow in major regional towns and these had loads of potential for good capital growth – which is what happened.
These days it seems that the only postive cashflow proerty you can get is in the small outer outer whoop whoop type areas. These may have limited capital growth – maybe even negative growth. Even in the so called good areas, we may be seeing a period of low growth for a few years.
So just be careful with what you buy.
BTW you can still get postive cashflow proeprty in the good areas, you just have to look harder and get creative.
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
Hi Toad,
You’ll find lots of good advice and reassurance in these forums, I know I have.
Like yourself I started on the cash flow positive trail at the beginning of this year, firstly looking in Australia, only to end up with 3 CF+ investment properties in New Zealand.
There are still plenty to be found there if you don’t mind long distance investing.
Take a look at the forums here… http://www.propertytalk.co.nz
Similar to this forum, but NZ based.
Happy hunting, Barry [thumbsup2]
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