Risk Mitigant for Declining Economic Climate

[qonyx_sydney]

Hi,

So i'm pretty new to IP. I'll have a PPOR and 2 x IPs by the start of 2015.

One thing that plays on my mind is if the macro-economic climate deteriorates (ie. Chinese economy experiences a severe slowdown for which Australia is highly dependent)which subsequently has an impact on the rental market and subsequently serviceability of debt.

This is in some ways holding me bank from being more aggressive and acquiring more property. I'm interested in some of the experiences of some of the veteran members, who when they started, potentially had high debt exposures with marginally neutral/positive investments.

My own mitigants are as follows
- Lock in the current 4.92% 5 year interest rate to mitigate IR impact
- Buy large blocks to build additional dwelling - ie granny flat or dual occupancy to increase gross rental yield to about 9-10%

Just want to know peoples thoughts processes that help them sleep better at night......

 

[vaughan]

http://www.theatlantic.com/national/archive/2014/10/welcome-to-prepper-camp/381351/?single_page=true

 

[Salvatore1]

I wish we had a crystal ball to tell you the future. From your email are you sure you are ready for 2 IP? Do you have any cash reserves for when it is vacant and there are repairs to be done? If you dont have reserves then dont invest. From past history owners make money on capital appreciation not rental collection.

 

[qonyx_sydney]

http://www.theatlantic.com/national/archive/2014/10/welcome-to-prepper-camp/381351/?single_page=true

I'd actually looked into this as well however decided that it may be a little over the top

For everyone else that is interested you can look at tickets here

http://www.preppercamp.com/index.php/buy-your-tickets-now

 

[qonyx_sydney]

I wish we had a crystal ball to tell you the future. From your email are you sure you are ready for 2 IP? Do you have any cash reserves for when it is vacant and there are repairs to be done? If you dont have reserves then dont invest. From past history owners make money on capital appreciation not rental collection.

I've got enough cash reserves to last about a year vacant....

so perhaps i'm just being a little too paranoid

so what i'm hearing is that your risk mitigant is really having enough cash reserves....

 

[Salvatore1]

I find a number of landlord over extend themselves when they buy investment property/ies and can not cope when the property is vacant or any repairs need to be done.

 

[Scott No Mates]

A good buffer is essential covering all expenses on the assumption of all properties are vacant for a prolonged period simultaneously (& park it in your offset account), factor in a 3-5% rate rise over the time frame have access to a LOC.