Global Financial Crisis

Strategies to consider during economic uncertainties

By SHIRLEY BROUN

FEEDBACK from my potential clients suggests people are confused about how to move forward in our current economic climate where an uncertainty surrounds not only Australia’s but the World’s financial future. Property investors can view the downturn in various ways including a winfall for those cashed-up investors who can take advantage of the lower property prices currently available or – from a seller’s perspective, dismay at the lower returns on their property investments.
Many property owners are choosing to hold on to their homes until the market strengthens, while others in financial hardship feel the need to sell as quickly as possible just to get the bank off their backs.

There are a few strategies to consider during times of economic uncertainties.

1. Buy properties that are in the highest rental demand locations.

2. Avoid over-gearing, in other words only borrow money you can safely service from your cash flow.

3. Take out landlord insurance as an absolute minimum.

4. Always finance the purchase of an investment property over the longest term and with interest-only loans.

5. If you want repayments to be a set amount, lock in the rate.

6. Avoid fringe lenders – for the short term at least.

Price Hike in Real Estate

Before I was involved in real estate, I heard people saying that the value of properties doubles every 7 to 10 years and wondered if that was, indeed, true.

I realise the time frame is only a guide. You have to wonder if this still happens when events such as the Global Financial Crisis (GFC) foist themselves upon us. I, for one, would have been happy never to have seen a GFC in my lifetime. But, I suppose it is like a lot of things, they go around in cycles – you know, like fashion, music, and Reality TV Shows. I’m sure I saw a Paris Hilton back in the 1920s too .. haha just kidding.

Well, getting back to property values. I bought a property on the Gold Coast in 1994. Paid $175,000. Now, 17 years later, that same property is valued at around $550,000 conservatively. This means it has more than tripled rather than doubled in that time. Not a bad return. Imagine having several properties all doing the same thing! The mind boggles at what we may be able to achieve.

Of course, you have to get started first. Buy the first property and then start to build. The first property is always the hardest unless of course you get a bit of a headstart from an inheritance or a rich relative or something similar. No such luck here but I know there are many just like me who are self made (or will be!). I am told it makes you stronger if you have to fight for what you want to achieve.

Oh, by the way, don’t think you will make all the right decisions either. Property investment is a learning curve. You will probably make mistakes – most of us do – but you will learn from them … hopefully! But, believe me it will be an exciting journey.