Owning and maintaining a property portfolio requires investors to be smart, patient, and vigilant.
When interest rates are low and the market is hot, it's easy to sit back and rake in the capital growth and cashflow rewards.
But when the market factors and environment are against you, it's important to stay pragmatic and ensure you have all your bases covered - with interest rates currently shooting up and continuing its upward trend, many landlords are facing the challenge of significantly higher loan payments and diminishing capital growth.
Smart investors will always be ahead of the game and think through various scenarios including different 'worst case' scenarios to work out various cashflow and equity positions. They will also maintain a good team of professionals and networks around them including mortgage brokers, accountants and experienced investors to keep them solid and grounded.
Lets look at a basic example of the current interest rates situation.
Assume James is an investor with 3 investment properties.
He has 3 investment property loans - his first loan is $600,000, second loan is $500,000, and third loan is $900,000.
Based on his 3 loans, James has a total of $2million in borrowings.
All of James' 3 loans are fixed interest-only loans based on a 2.9% interest rate.
This means James is currently paying $4,833 per month in repayments.
When James' fixed loan period expires, the rates will have increased from 2.9% to 7%. This means James' repayments will increase to $11,666 per month, which is almost THREE TIMES the repayments he is currently paying. Repayments will be even higher if James' loans move to Principal & Interest.
James will now need to work out how to maintain his current portfolio, look at re-financing options, and may need to consider selling 1 or 2 properties depending on his cashflow position and longer term goals.
PropertyDirector has developed tools to easily track and monitor your property portfolio, to enable investors to plan for future uncertainties such as increasing interest rates and changes in cashflow and capital growth.
Register now and start taking advantage at these digital tools to stay ahead of the game - https://www.propertydirector.com.au/registration/1
