The recent tension in the middle east and the sharp rise in fuel prices have already caused a stir in the Reserve Bank in Australia. Today they increased interest rates for the second time this year. People were on the news saying they were already cash strapped and had been watching their spending. They are going to feel the pinch over the next few months.
As real estate property investors, what should we do then? Here's a list of priorities that need to be addressed:
Exercise extreme caution and prudent due diligence on potential deals
Look at ways to reduce debt, particularly in the following situations:
* Personal debt (credit cards, personal loans)
* Home equity financed personal debt (equity loans used for lifestyle)
* Investment debt against non-income (ie growth) bearing property
Review your property portfolio
* Have strategies for protecting interest rate sensitive property
* Consider cutting the asking price for your real estate investment property that has been on the market
for some time
* Re visit your calculations on your present deals based on interest rates being .75% higher. Act to protect your self and provide a buffer
Now would be an appropriate time to see your financial advisor and review
your investments assets
Build cash reserves. Cash is king, money talks B / S walks.
Increase your financial literacy. Anyone can make money in a boom, but it
is much harder in uncertain times. Get your self more education and a mentor, attend more seminars.
Renegotiate and lock in employment contracts, particularly subcontractors
Defer non-essential lifestyle expenditure
If you are looking to borrow money for a real estate investment property, start working on a
Keep networking with people, you may not need them now, but you may
need them in the future, proxy is power! A good peer group of people will propel your wealth creation.
Risky deals that require hard cash
Using your home equity to fund non-deductible lifestyle debt (jet ski's, holidays, motor bikes and cars etc)
Do not quit your job to become a full time investor
The financial excess that was in the boom times will quickly
disappear when higher interest rates arrive. Times have changed and
will change further. It's critical that you always educate your self to the changing trends in real estate investing. If you need help then seek it out
immediately, money and time spent to do this will pay huge dividends in the long run.
To your investing success.
PS If any of your family or friends is interested please pass this on to them.