When things get tough

What is your best advice for when there is a downturn in the market, when lending criteria tightens, when rental markets soften (I know they don't all happen at the same time).

For the purpose of people just starting out, What is your best advice for when things get tough.

 

Dont give up when it gets tough and it will and is. Be in it for the long term and set realistic goals that you can achieve one small bite at a time. Get the right team of people behind you. Keep learning and growing by living outside your comfort zone. Make being uncomfortable your new comfort zone.

 

But sometimes they DO all happen at once! And for some, you can toss unemployment into the mix.

You MUST have a decent buffer.

Today there seems to be far too much emphasis on getting 8-10 houses in 12 years or so rather than ensuring the security of ability to ride out downturns.

Despite recent insignificant interest rate rises, rates are still close to historic lows.

Anyone whose portfolio can't cope with 8% or 9% rates should have a very good exit strategy in place. Reliance on interest only loans with high LVRs can add to vulnerability.

As owners in Moranbah discovered - when the tide turns it can turn very quickly.
Marg

 

For me at the moment, it's going back to the basics of tightening my belt even more. Maybe find ways to cut costs to my bills, search for a better deal, only buy necessities and not wants, and find strategies to increase my personal earnings. There are opportunities to increase your base earnings with a second job, doing overtime and market research gigs. I was taught early on that with any offer of overtime, to take it because better to suffer work stress than unemployment stress.

As a personal thing, I do more work on my IPs to make it as homely as possible for my tenants in comparison to my own place. Maybe one of these days, I'll do some renovations on my current place but at the moment, I don't see a need for that and it's ok for now.

 

What doesn't kill you , makes you stronger.

Been through a number of those scenarios through my last dozen years of investing. My advice is to just grind through it and always seek ways to improve

 

Yes they do happen at once... if you live in Perth, or Karratha, or Gladstone..

For someone starting out, look at all your investment options.. res prop is just one and the markets are different everywhere. Keep saving, until you can comfortably afford something. That could be a house/unit, or a business, or shares in a business.

I've just done an assessment to see if I should continue to hold, sell, buy more / buy elsewhere...
For now I'm holding, and focused on paying down ND debt, keeping the options open to buy another IP though.

Oh and one last thing... if you're married/defacto (whatever), make sure your other half is on board.
Otherwise, "When things get tough, the tough's other half get things"..

e.g. handbags, clothes, TVs, 7.1 surround sound home theatre, HSV/WRX... it's stress buying from a sense of hopelessness "we can never afford xyz, so I'll buy stuff I can afford".

 

Agree with this and add diversification, when one market tanks look at other markets that are moving.

 

Perfect time for opportunities.
When everybody else is regressing and getting defensive, these are the times to get aggressive and make your moves.

 

I agree, do the opposite to what everyone else is doing. This means being cashed up and ready when everyone else has reached a serviceability halt and is fully maxed out in debt.

 

Yes indeed, I agree also however...... during extended low interest rate periods most tend to borrow, borrow, borrow.... then when the tide turns as it has begun to, most will be anything but cashed up.

To capitalise on the next phase of the cycle, action to consolidate should already be in full swing IMHO. As rates rise throughout 2017 the pressure will be towards cooling property markets & some will start feeling mortgage stress as many have borrowed far more than is sustainable in a balanced market.

If we see an increase of 75 basis points this year, it will be on like Donkey Kong....

 

Basics of investing -economy/property clock. Learn about this because its's all been done before. Have a buffer for unforeseen value dips or IR rises. Don't assume you'll be able to sell, even at a loss if you have isdues holding.

Seen investors who lost everything and those holding with few issues through high IRs. The boring sensible ones often have the last laugh.

 

Yes slow and boring wins the wealth every time.
And that concludes this forum - you don't need any of this information.

 

When there is a downturn usually lending will loosen ...it takes guts to run into the fire when everyone else us running away.

This will happen in Sydney in the next 2 years....and will present and excellent window of opportunity ...the craziness in that market is now turning to fear/panic...matter of time. Most experienced investors have seen this before ...the inexperienced can't see it..and it will be a very hard life lesson if they are not careful and have their eggs in Sydney....

 

When I buy shares, I delete them from my watch list so they aren't constantly looking me in the face.

When I hit my max borrowing limit, I stopped visiting this forum for about a year, I stopped reading about what was going on in the world. If a big enough event happens like WW2 or a GFC2, I'll find out about it quickly enough. That sort of stuff isn't avoidable.

Basically, just tune out. Get on with your life. Return a few years later and hopefully you'll be in a better spot and realising oh, christ, things are looking pretty peachy!

 

Good advice
Could also apply to people who purchase properties in low socioeconomic /high cashflow areas. Don't worry about shorter term fluctuations as long as you can hold for the longer term. Capital growth is usually lower in those areas.

 

Life is always full of challenges. Relatives dying, your house going up in flames, losing your job, going bankrupt. Just got to keep living it.

 

I really hope you are not having those challenges Omni

 

Identify the bare essentials and minimise the fixed cost relating to them where possible i.e paying off as much of PPOR as possible, appropriate internet/mobile plans =P...etc.

Beyond a shelter over your head, everything else is all gravy and can be scaled up/down as you require to ride the good and the bad waves.