If you have owned a rental property in Melbourne over the last 20 years, it’s hard to have had a bad experience when it comes to its value increasing.
Owning real estate that always seems to go up in value is exciting and it’s natural to want to expand the portfolio.
But there is a lot of negative press out there about the state of the economy, the flat housing market and potential economic turmoil from global influences.
Then there are the questions in your own head like ‘has the market had its run? The answer is no one knows, trying to guess the future will not give you an answer either.
We look at a few points that will help you block out the white noise to help you make a clear decision.
Use A Good Source For Economic Data.
Good data can free you from the fear of the unknown. It turns a scenario that could feel like a wild risk into a calculated decision. Wild risk creates indecision and uncertainty. So where do you turn to for good economic data?
Media is a poor source of information when it comes to reliable economic data. Real Estate articles are written to create interest through fear rather than fact, as we all know it’s hard to not click on the page when you read a head line like: ‘Is the real estate bubble bursting?’ or ‘House prices could decline 40%.’
Modern media generates its revenue though viewers clicking on provocative headlines that capture people, you hear the headlines from your friends at BBQ’s all the time.
Importantly, if you follow the media long enough you will see the same headlines recycled over and over and over. Through the decades their strategy hasn’t changed.
A great, free source of unbiased economic data on the state of the economy, refer to sources like Australian Bureau Of Statistics or monthly meeting from the Reserve Bank of Australia.
It’s important to remember, Australia has one of the best economies in the world that has proved stable even through global turmoil over many decades.
Our real estate market attracts international investors because we have a long history of steady growth.
Ask yourself the question, ‘has the real estate market seen a 40% decline in your life time? Your parents life time?
The plan B option.
Owning a property portfolio always has risk attached, if it didn’t then everyone would own an investment.
The plan B scenario is your plan to get out of jail if something changes in your regular cash flow and you need to re-coupe money.
Some people chose to buy property that is sub-dividable and reduce debt by selling part of the property. Other strategies could look like buying a renovator and building in your own equity, increasing your rental yield by renting individual rooms or having an insurance policy that protects your income.
In any scenario, it’s wise to have a cash reserve that will help you float for at least 6 months. This is a healthy time frame to off load property in any real estate market that Melbourne has experienced in the last 40 years.
The plan B option will free you from the fear of change in circumstance and act as your personal insurance policy.
To be able to move forward, it’s wise to have a calculated strategy that minimises risk and has a plan B strategy if things go wrong.