What are the risks of not investing now ?

[WillG]

Hi fellow forumites,

After reading some posts on 'Goal Setting' and strategies for making big $$'s I pose the question ...

What are the risks of not investing now ?

After experiencing good growth over the last couple of years and not having a lot of 'bad' / 'undeductable' debt I am deciding where to go next.

I am toying with the idea of consolidating my position while interest rates are low by saving and adding value to existing IP's to maximise rent. When supply outstrips demand (5 to 10 years) I should be in a position of power ready to snap up some bargains while the 'average Joe' is having problems meeting repayments on overpriced properties.

The above 'plan' is conservative but will allow me to meet my financial goals in 10 to 15 years with minimal risk as long as the next bust/boom cycle occurs in that timeframe.

Any constructive comments appreciated.

Cheers,
Will

 

[brains]

Sounds like a sound workable plan to me. Conservative but safe and will get you long term results.

 

[MF35]

Why is supply going to outstrip demand in the next 10 - 15 years? Not contesting the suggestion necessarily just wondering on what you have based the assumption. Interested that's all.

MF

 

[WillG]

Why is supply going to outstrip demand in the next 10 - 15 years?

Just a guess really ! Rising interest rates, unemployment, the cyclical nature of property cycle - crystal ball stuff

 

[chrisj]

Agree with you WillG,` Just do what nobody else is doing, and then buy when eveybody else is selling..

History has a history of repeating it's self...

Just my 3 cents worth

ChrisJ

 

[dantheman]

Will,

The risk is waiting too long and missing the next boom, there is a saying that goes along the lines of "it's time in the market, not timing" (in Jans books?). In that 5-10 years you mentioned, maybe near the end maybe not, there will be another boom and those who have accumulated prior to that will get the same push along that was received by those who accumulated prior to the current boom. Many had their net worth near double from the last 4 years results.

Just my 2c worth. My strategy is to be leveraged to the hilt always fully invested so I'm positioned when I need to be. I'm not smart enough to pick the cycle. Mind you at the moment because I'm just a beginner leveraged to the hilt for me means 2 IPs

Also if you can manage to find good returns ie + geared then it's not such an issue sitting still for a year or two.

Dan

 

[kissfan]

Good call Will. I have a bit of time on my hands so I am constantly doing figures etc on bits of paper and the likes to see how I can alter my situation for the better. I have different loans , some P&I and others I/O. Everyone's financial position is different I realise but I too am thinking of concentrating hard on some of my loans to try and get a bit more equity. I was thinking of leaving my P&I loans as is and actually hitting the I/O loans to try and reduce them so that when they do convert to P&I the repayments will be lower than anticipated and hopefully free up some cash for further investing. I suppose everyones strategy is different and you have to be comfortable with what you are doing which is why I'm thinking of reducing debt. I'd hate interest rates to jump and be in a position of hardship as I fear might happen to some investors. That's my thought now, next week I may be saying to buy buy buy. Hope others can add to this post to offer their thoughts (good or bad)
Cheers

 

[dantheman]

Originally posted by kissfan
I was thinking of leaving my P&I loans as is and actually hitting the I/O loans to try and reduce them so that when they do convert to P&I the repayments will be lower than anticipated and hopefully free up some cash for further investing.

When your interest only period is up just start another one, I don't think there is a rule that you have to pay the principal. I think it was Peter Spann who advocated staying interest only all the time and actually taking all the loans to the grave, ie why pay the bank back when you can buy more investments etc.

 

[kissfan]

Hi ya dantheman. Yes, Spanny (and a few others) have advocated to keep loans as I/O but I intend on eventually selling my PPOR and moving into one of my I/P's and at the same time reduce a lot of debt. Then I want to have enough rents coming in to live fairly comfortable (hence paying the loans down a bit now, and refinancing further down the line), then continuing to invest. At the end of the day, I personally feel a bit better with less debt. Dont get me wrong, as I mentioned, I still intend on investing, I just like to have all bases covered should interest rates rise or something unforseeable should happen. I'm always open to ideas and appreciate your thoughts
All the best

 

[dantheman]

Hi Kissfan,
Yes it all depends on your own circumstances, and your tolerance for risk as well.
For example with myself I wish to take on risk for the reward of high return and am willing to accept that if something unforeseen happens such as interest rate rises I will sacrifice my lifestyle to keep my investments working.
This is fine for me because I am young in my early 20's with no dependents but naturally this strategy wouldn't suit someone with children for example that rely on a good lifestyle to provide an upbringing.
I think it is fine to reduce debt and pay principal to lower the risk exposure.
Maybe it is best not to make the loans officially P&I though because then you are FORCED to pay the full value of P&I payments by the bank which could be considered risk as well. Why not have I/O and a portion(or all) I/O variable where you can pay as much extra as possible but if you get into trouble with unforeseen personal circumstances you are only liable for the interest. Much more servicable if the unexpected happens.
Just another idea, it's great to throw them around.
I think it's great looking at each others circumstances because one day we all go through most of them and will have some foresight from the strategies others have used.

Dan

 

[jackerouac64]

Originally posted by chrisj
Agree with you WillG,` Just do what nobody else is doing, and then buy when eveybody else is selling..

History has a history of repeating it's self...

Just my 3 cents worth

ChrisJ I find it interesting what you have to say and I see so many people buying investment properties. How long will that go on for? Who will be renting them? When do you think the bust will come so I can buy them? I personally dont want to buy now becuase they are all priced too high. Me thinks the stock market might see a better return.

 

[Bill.L]

Hi all,

Kissfan, How about you put your extra savings in an offset account on one of your P+I loans. It reduces the interest you pay, just like paying off your loan, but you have access to your money should the need arise. The best of both worlds.

bye

 

[James1977]

Hi all,

Agree with Dantheman here, time in the market is everything. Compounding growth takes a while to wind up to really substantial levels, so get in as early as you can I say and reap the benefits sooner rather than later!

Personally I'd rather be leveraged to the hilt now and be able to afford to act a little more conservatively later.

Just my preference...