You’ve seen the signs, so next comes the plan…

So what do you do when you start to see these indicators playing out?

Once you see the signs I mentioned yesterday you should notice the property market start to recover after a couple of months, maybe more, but remember there is always a lag.
This is when your buying strategy should start.

I will take you through a new long-term plan later.

You need to make the most of any price rises

No1. Make the most of the rise in prices.
I have 3 things to say about this one – Location, Location, Location.
Buy properties in great areas which will see the most growth.
Buy in areas of current not future (more than 6-12 months) regeneration.
Be a bit cautious in your plan.
No2. Lower your debt.
Start to pay down debts while the rates are favourable.
Use surplus cash flow to pay down debts.
Trade a few properties to help pay down debt.
Don’t do nothing!

No3. Make a decision about when to sell some stock to help reduce the debt.

Maybe when values reach a percentage above what they are currently.  Personally I would look at 25% – you need to catch the wave.

This can be tricky and it’s why you need to make the decision now.  Once values are on the move make a decision and stick to it. You will be tempted to hang on but you won’t want to be holding on to too much debt when the rates top out.

There is always a lag; this can be good for us, like when good things happen the market starts to rise. But there will be a lag, lots of things coming together.
The market will continue to rise but you want to be out prior to it topping out.

 

Adapting your long-term strategy.

This is the most difficult area due to conditioning from the property investment training area. Most of the so-called professional property guru’s and trainers have never experienced high interest rates and consequently don’t advise what to do.

They believe that stress testing your portfolio is ok at 7-8% and can’t see any reason why the rates would ever get that high.

Also, they haven’t done business in a really depressed market for any long period of time.
Yes things have been tough over the last 5 years but not really depressed.
Its only lending that has been the challenge.

Now in recent times when lending was, well, out of control you could borrow and borrow and when rates were so high it didn’t matter, you just borrowed some more and it became a massive merry-go-round.  That was all well and good but I don’t think we’ll see that sort of stupid lending again for some considerable time.

It did have its uses and enabled many property millionaires to spring up.

This, I believe, will not happen again for some considerable time, maybe never.  It does depend on how the governments of the world treat the banks.
You never know, they may well do when the market spikes again but not for long.

So what do I recommend?

Well, sell everything and take the money and live on a beach lol!!

No, all jokes aside.

You will need to consider recycling your properties because if you are going to take advantage of rising property values without increasing debts then you need to sell.

Now we know the quality of the tenants will decrease in time as the market improves, so selling properties which are less desirable should be in your plan.

I recommend 3-2-1 – the next 3 deals you find:
Sell 2
Keep 1
Keep the best one

You see…

When you sell the other 2 you put the money towards the 1 you keep which helps keep your debt down.

This is the old fashioned way of property investing – ‘old skool’.

Selling the other 2 is tricky as we speak and you need to consider current market conditions.  It also depends on where you are in the country.

As with any business you have to consider who your market is.
Is it First Time Buyers, Investors, Second Time Buyers or Retirement Buyers?

Please, please do not guess – check and double-check.
Once you have established your market the question then is:

Do you refurbish?

Or trade?

This is a question for you to decide depending on your area and market conditions.
So, I’ve given you an outline of how and what you could do and now it’s up to you.

 

But please don’t say I didn’t warn you!!!

m4s0n501

Filed under: Property | Posted on October 22nd, 2012 by PaulRibbons

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