The key to surviving in a downward market is having a strategy and set of buying rules that you commit to regardless of circumstance. In this, and in any
market, the team you have around you will be the key to your success. A good mortgage broker, solicitor,
building inspector, insurance broker, real estate agent and property manager will give you the information and professional support you need to succeed.
Over and above that, there are specific and important issues you need to develop an understand of and tailor your individual circumstances to. They are:
having a financial buffer, market cycle, portfolio longevity, and cash flow.
Financial Buffer
Having a financial buffer is key in this market. Your financial buffer must relate to how much you need to cover your personal expenses when things go
wrong.
The general question is how many months you would like your reserves to last if you lose your income or get flooded with costs all at once. At this time
in the market, it may be worth considering (or re-considering) your minimum cash reserve.
- Loss of income can come in the form of loss of employed, or business income, debtors not paying on time, missed rent, etc.
- Cost increases could be unexpected expenses – potentially property related maintenance, or even fluctuations in mortgage rates.
Another form of a financial buffer is the ability to access the capital in your property(ies) so that you can take advantage of opportunities when others
may not be able to. This can either be in the form of offset account or revolving credit set-up with your lender to access the equity that’s locked
up.
Depending on the amount of capital you have...
