How would you answer the questions Steve posed recently for your situation? Will be interesting to see how various property investors on this forum would deal or prepare with these potential scenario….
Scenario 1 – Interest rates went to 15%, or higher?
Scenario 2 – Property values dropped 20% or more?
Scenario 3 – The bank rang up and wanted the loan money back within 72 hours?
Scenario 4 – You lost your job and had a heavily negatively geared portfolio?
Scenario 5 – You bought something that, had you known better, you wouldn't have touched with a barge pole?1. Probably sell one house to reduce our debt, or I would get a job two or three days a week if we didn't want to sell.
2. No problems for a buy and hold situation as long as rents keep coming in.
3. Highly unlikely, so not really needing an answer.
4. Contact the bank immediately to ask for a repayment holiday for a short time, but less important for us right now as we have paid interest in advance for twelve months, so we have breathing space if hubby lost his job.
5. Wait for the best time to offload it.1. Hold
2. If appears to be a trend, sell, otherwise hold.
3. Sell
4. Get another job, if not successful, sell.
5. Same as scenario 2. Its all about whether the numbers stack up.I'll answer for the 'average australian' :
Scenario 1 – Go bankrupt
Scenario 2 – Go bankrupt ( because scenario 3 would come into effect )
Scenario 3 – Go bankrupt ( due to negative gearing and negative equity )
Scenario 4 – Go bankrupt
Scenario 5 – Go bankrupt ( because you can't sell it in this climate )1. Sell properties/assets that were unlikely to experience growth in value. I would probably offload them prior to interest rates getting this high. Monitoring the economy is important. If you are positively geared, you may be OK anyway. Increase the rent
2. Hold. A decrease in value is only a problem if you need to sell
3. Interesting. I would refinance
4. I am self employed and have insurance to cover such a scenario. However, you would get another job/jobs pronto
5. Sell it. Mistakes happen to risk takers. If it's a lemon, you take a hit and move on. Your first loss is your best loss. Learn from the mistake and don't do it again. The only person that's never made a mistake has never tried anything.1. Stay (or move!) overseas and refinance any AUD loans to foreign currency (interest on USD loan now around 3% – 4%)
2. Buy
3. Call some of the other banks I use
4. Get another job, or maybe finally start for myself
5. Sell & Learn
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