Saturday, May 2, 2009
A light bulb moment....
Property investing in the good times (for example from 2000 - early 2008) is easy. There seems no end to the ever ongoing growth in values and it's easy to be bullish and spend up big. I have however just realised that although these were the good times, it is more important to remember that interest rates were quite stable. Rates were around 7% for quite some time and this made calculating your cash flow easy. As interest rates have now dropped, investors have to look to the future....what will happen if rates go up again?
Well, honestly, the shit may hit the fan and the following selling frenzy will end in all property investors living in cardboard boxes. Seriously, the low interest rates have me worried. I "COULD" buy about three or four more IPs right now...I could leverage up just because they would be soooo easy to manage cash flow wise. But what will happen if we get a sudden 2% increase in rates?
This thought has been troubling me for a few months and it is why I am sitting on my hands. However last night I realised that this isn't quite the case. So here are some of the reasons why I will buy again soon:
1. Rates will stay low for a while yet, let's say quite safely that they will not hit 7% for two years.
2. Wage increases SHOULD occur (well, for me anyway).
3. The world finances will go back to business as usual soon.
4. Escape plan? I can always sell...
So considering these four points above, I will buy IP No.6 - probably in Toowoomba again, but there are bargains popping up everywhere at the moment.
Good luck IP Jedi...