Most articles that promise words of wisdom as to how you can protect your investment property portfolio focus on things like insurances, cashflow buffers and ‘the perfect’ loan product. Our approach is a little different.
Really, the only way you can maximise your chance for successfully sustaining and growing a wealth generating property portfolio, irrespective of the financial climate we find ourselves in at any given time, is to start out with the right approach.
That means blocking out the background hype that often circulates around our property markets and getting right to the heart of your own, personal reasons for becoming an investor and seeking financial freedom through real estate.
Often when there are changes in circumstances that impact property investors, such as interest rate fluctuations, the ones who continue to prevail are the ones with a watertight strategy.
So here are 5 ways you can prepare yourself to survive the inevitable, upward ascent of interest rates, whenever it happens.
1. Cut through the noise
This is difficult because property and finance spruikers, along with enthusiastic media commentators, are yelling ever louder in their efforts to be heard. The trick is to focus on your own personal investment strategy, working confidently toward your goals in a methodical, planned way.
Having a solid, risk assessed approach will mean you’ve accounted for the highs and lows of property cycles, as well as interest rate environments and taken the necessary precautions to maintain your foothold when financial markets move in a different direction.
2. Avoid being reactive
It’s easy to look around at the bevy of activity currently underway in most major housing markets and feel like you’re missing out if you don’t buy something immediately!
Usually though, when everyone else is jumping on the bandwagon, you’re better off making an exit. If another property acquisition is timely for you right now and complements your current position, property portfolio and overall investment strategy, then by all means shop away. Just don’t be fooled into thinking you’ll lose out on an opportunity by remaining on the sidelines for now.
3. Count your chickens
Times like these are a good opportunity to reflect on how far you have travelled on your property investment journey and review your portfolio. Critically and objectively assess your investments against your set goals and measure where you are at this juncture. Is this where you wanted to be? Do you have some catching up to do? Or have you exceeded expectations?
Depending on your assessment, you will know whether now is a good time to buy or not. And maybe, if you happen to have a bit of an investment lemon in the pack, it could be a good opportunity to liquefy an asset and look for a better replacement?
Importantly, review your property investment finance structure. Are there better banking deals you could be taking advantage of, or is now the perfect time to access existing equity and refinance?
4. Be selective when taking advice
The hotter our property markets become, the more armchair experts emerge at dinner parties and backyard barbecues, proclaiming their extensive knowledge of all things bricks and mortar and extolling the virtues of some new property investment strategy or spruiker.
Don’t be tempted to take advice from Uncle Ian, no matter how compelling his argument for investing in Guatemalan pigmy enclosures might seem.
Instead, continue to seek out guidance from those experts within your investment circle who understand real estate and are an integral part of your journey, including a qualified accountant, mortgage broker and buyer’s agent.
5. Don’t get caught up in timing quandaries
Many property investors end up missing opportunities because they become distracted and lose focus on their own path. Likewise, some jump at opportunities that would be better left alone and end up creating obstacles for themselves and their investment portfolio’s long-term success.
Timing the purchase of property assets must be based solely on your own life circumstances and investment ideals. Market timing should never become a major influencer in your overall approach.
Just because interest rates are low and ‘everyone else is doing it’, is not a good enough excuse to throw yourself into the current frenzied property waters, especially if doing so might jeopardise your long-term retirement income.
Staying on track rather than following the herd is the best way to protect your financial and property investment portfolio. This approach sees successful investors climb all the way to the top of the property ladder; navigating any interest rate bumps along the way, without missing a beat.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).