Player, why do you think we are heading for a recession, what are you basing this prediction on?
Next steps - expanding the portfolio
- Thread starter MsAli
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Player, why do you think we are heading for a recession, what are you basing this prediction on?
Player is wise experienced investor, he is pointing out the obvious, he said we may be heading to a recession, but no one knows for sure however the mining boom is over, Aus $ falling, unemployment higher than norm. In current market it is important to manage LVR, if market turns and you are highly LVR you could be in serious pain, booms dont go forever, and no one rings a bell when the market peaks
You are only in pain if you have a portfolio that is running cash flow negative, and a recession might see rates fall to buffer that partially, anyway. But really, a paper loss of equity is irrelevant if you aren't selling and the portfolio has the necessary cash flow to hold through a trough.
Cashflow is only one factor to consider.
All losses are massively relevant to me
Lifeline for investor to continue to grow portfolio is equity and servicing loans (cash flow).
If these 2 items are not acheived the consequence is that you lose valuable years while you are waiting for the next cycle, even worse your loans are greater than the value of your properties. ......ouch, and double ouch
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Of course you are correct, and equity + cash flow are critical - this is something I believe very strongly, but your post read " if market turns and you are highly LVR you could be in serious pain" and I was responding directly to that. Only cash flow will save you if markets turn and you lost your income source from a recession and you were highly geared, was my point. Losses of equity are not real losses unless they are actually realised. Yes, equity losses create opportunity cost losses, but they do not create real cash losses.
A loss is a loss, paper loss is a loss, don't kid yourself...... I wont wear this, makes no sense to me, opportunity losses means TIME. xx years, you don't get that time back...??
Not a strategy a sophisticated investor would use
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Great thread! I think its definitely worth 'planning for the worst' and seeing how to manage 'recession risk'.
MTR, great point about assessing the TIME cost. I think you may be referring to the lost equity that occurs when there's a recession in some markets and your property value falls.
From a finance perspective, so long as your servicing is ok (you keep your job and rents don't fall too far), you will still be able to access equity for individual properties in your portfolio that do move forward - even if you have a few properties that have moved backwards and your total portfolio equity has decreased.
Noting this point, the BEST way to manage the TIME risk is to:
1. Keep your servicing/income strong and reliable.
2. Diversify your portfolio. Across Australia, markets will always move at different paces. When the overall market is moving backwards, so long as you have some properties that are moving forwards, you'll still be able to access equity from those properties.
This is probably relevant to OP - having such concentration risk (SWS dependant) does expose you to large 'TIME' costs if the market turns. Instead of diverting cash/resources to paying down debt where your return is around 5k, it may make sense to manage this risk by diversifying to different markets/locations.
Cheers,
Redom
MTR, great point about assessing the TIME cost. I think you may be referring to the lost equity that occurs when there's a recession in some markets and your property value falls.
From a finance perspective, so long as your servicing is ok (you keep your job and rents don't fall too far), you will still be able to access equity for individual properties in your portfolio that do move forward - even if you have a few properties that have moved backwards and your total portfolio equity has decreased.
Noting this point, the BEST way to manage the TIME risk is to:
1. Keep your servicing/income strong and reliable.
2. Diversify your portfolio. Across Australia, markets will always move at different paces. When the overall market is moving backwards, so long as you have some properties that are moving forwards, you'll still be able to access equity from those properties.
This is probably relevant to OP - having such concentration risk (SWS dependant) does expose you to large 'TIME' costs if the market turns. Instead of diverting cash/resources to paying down debt where your return is around 5k, it may make sense to manage this risk by diversifying to different markets/locations.
Cheers,
Redom
Redom
Excellent post, you get it
Diversification portfolio, investing in various States in Australia A good way to go
Thanks MTR. Its just the way lending works. The above also highlights one of the main reasons why X-coll is so damaging - missed opportunities when you cant separate loans and securities.
I strongly recommend starting a business. Make sure it is something you can do part time outside work, so that you can focus on building it while working, then make the transition when it is making enough to cover expenses.
Listen to the following podcasts:
- The James Altucher Show
- StartUp (Gimlet Media)
They are fantastic resources for building businesses and entrepreneurship.
It's like playing frogger... if you get your timing right, avoid get run over and catch the next moving log you'll get to where you want/need to go faster
Frogger has earned the ominous distinction of being 'the arcade game with the most ways to die'". There are many different ways to lose a life, including:
- Being hit by or running into a road vehicle
- Jumping into the river's water
- Running into snakes, otters or into an alligator's jaws in the river
- Jumping into a home invaded by an alligator
- Staying on top of a diving turtle until it has completely submerged
- Riding a log, alligator, or turtle off the side of the screen
- Jumping into a home already occupied by a frog
- Jumping into the side of a home or the bush
- Running out of time
Thanks Mr. Fabulous
There are a few things that are on the list....That we plan on doing
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Why tell them? It's outside work hours, it's none of their business. Did you ask permission to purchase IP's? No? Then why ask permission to start a second business?
If they find out and give you an ultimatum, then thank them for the opportunities they've provided you and find another job.
Always, always, always put yourself and your interests first, above all others.
You make a good point. But although I have ambitions beyond the corporate world, I want to be fair to the policies as I really revere the place I work for (though I know I know I shouldn't)....Actually it's not the organisation which will have any objections except "people". Different people have different perceptions. I need to tread my waters carefully before I ask them esp it being a new team.
Also, for me real estate is like running marathons is for someone else..just a different interest..
I'm meeting one of my previous managers whose very senior and I will be asking him for advice - now that I'm not under him...
I did ask a mentor within the organisation who did the same business in real estate for a few years and he thought as a manager he would be questioning whether you would jump the ship down the track..
It's like playing frogger... if you get your timing right, avoid get run over and catch the next moving log you'll get to where you want/need to go faster
Frogger has earned the ominous distinction of being 'the arcade game with the most ways to die'". There are many different ways to lose a life, including:
- Being hit by or running into a road vehicle
- Jumping into the river's water
- Running into snakes, otters or into an alligator's jaws in the river
- Jumping into a home invaded by an alligator
- Staying on top of a diving turtle until it has completely submerged
- Riding a log, alligator, or turtle off the side of the screen
- Jumping into a home already occupied by a frog
- Jumping into the side of a home or the bush
- Running out of time
Jumping into a home invaded by alligator
Of course he would - because that is exactly what you are planning to do, as soon as possible. Be okay with that.
Don't forget, he did the same thing once upon a time.
Just cross your fingers that he hasn't/doesn't tell your new manager your plans. If so, discard this person with the quickness as they will have proven themselves to be a worthless human being.
