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Job Redundancy - Risk Mitigation

Discussion in 'The Buying & Selling Process' started by Ash, 20th Apr, 2016.

  1. Ash

    Ash Well-Known Member

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    I am curious to know how people manage this

    I mean if someone has 20 loans all serviced by Rental income.
    but if he becomes redundant in job and at same time 5 properties go off the rent then how to mitigate this risk ?

    the way out is to keep savings of say 6 month rental for 5 out of 20 properties .. which will again be huge amount ?

    I understand income protection properties don't cover for redundancy , is there any other policy which can help in such situations ?
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Some insurance policies for personal injury/income protection cover redundancy.
     
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  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Do a risk analysis and mitigation exercise.

    Look at what the risks are and what it would cost you. Keep in mind the cumulative effects and how long it would take to rectify the situation.

    Figure out how much it would cost to cover that period of time.

    Have insurance or cash in the bank suitable to cover that period, plus a healthy buffer just to be sure.
     
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  4. DanW

    DanW Well-Known Member

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    The way we handle this:
    -Landlord insurance will cover unpaid rent or disasters (except for vacancies)
    -Income protection insurance covers injury/sickness
    -If redundant from job can use a buffer kept that covers over 1 year income. Buffer comes from:
    a) Offset account
    b) Share portfolio (purchased with equity)
    c) Length of service with job = large payout if redundant
    d) Interest only loans, never P&I. The principal portion can be paid into an offset and used later in case of a disaster/redundancy

    If needed, one can sell some share portfolio and use the funds to pay IP costs. The interest on that can still be deductible as it is used towards IPs (although would have to apportion it separately).

    Always good idea to not be living on this months paycheck..
     
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  5. Shawn

    Shawn Well-Known Member

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    I believe you can claim financial hardship from your Superannuation fund and withdraw the benefits.
     
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  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Odds of your super fund approving this sort of claim for redundancy or vacant IPs is virtually nil.
     
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  7. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Hustle your way of of trouble.

    If you're taking the gamble of high LVR's, then you gotta take a risk of losing if things turn bad if you don't have a decent buffer or adaptable skills to earn money in any economic environment.
    The more buffer you have, the more you can gamble and go for the gains.
    Playing tight and scared can limit your long term gains.

    Build a buffer/bankroll so you can play the game properly.
    Anyway, one will not just accidentally get to 20 properties without a good foundation or time in the game.
     
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  8. SmashedEconomy

    SmashedEconomy Active Member

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    Agreed 100%. It is scary that people have to ask for solutions like this when common sense should really be all that is required to sort it out.
     
  9. chindonly

    chindonly Well-Known Member

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    We do pretty well exactly this. Also have additional equity in properties that can be drawn on.
     
  10. aussieshorter

    aussieshorter Well-Known Member

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    I'm currently in a situation where I have a redundancy coming in about 12-18 months time. I know it's coming (the company is selling assets and shutting down the Australian office), but don't know the exact timing.

    I'm looking at it as a huge positive. How many times in your career do you get a 12 months notice period, with a payout at the end, and with plenty of hours outside of work (and some inside) to work on side projects?

    I'm using the time to push a few side projects along in the hope that at least one of them can become a full time business when the redundancy hits. So that's my form of insurance - having something that can replace the regular income. In the mean time, I have buffers in place to get me through short periods of no income.
     
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  11. devank

    devank Look, lets just get on with this, ok? Premium Member

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    1. Have good insurance (all kind)
    2. Keep your skills updated so that you can find another job soon.
    3. Have one set of buffer in offset and another set in shares.
     
  12. larrylarry

    larrylarry Well-Known Member

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    I agree. 20 properties will take a while yo accumulate especially in the current environment.
     
  13. Ash

    Ash Well-Known Member

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    i initiated the thread to know how people are managing this part :) a lot of information. Thanks guys .... @DanW @devank
     
  14. Big Will

    Big Will Well-Known Member

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    Payout, insurance, off set accounts, shares (in order).

    If you had 20 property they wouldn't be all severely negative geared (maybe 3 tops) otherwise you are going very aggressive. However you should have offsets with money left in them or should have built a share portfolio for diversification.

    If you can see the writing on the wall like @aussieshorter, which isn't uncommon then I would apply to the bank before then and maximize your loans and keep the money in the offsets.

    If you had 10 properties being able to pull 100k equity then you would have 1M in offsets which should be able to service you until you get back on your feet.
     
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