I would like to hear about people's different investing strategies.
I am looking at buying a third rental property - my strategy is to never sell and eventually build a big property portfolio that I can retire on from a passive income (a long way to go yet!).
I only have two properties now (live in one, and rent out the other).
If mortgage rates where to rise to say 8-10% and my tenants moved out, I could still quite easily cover the mortgage and all expenses for both properties. The current rental property is cash flow positive and doesn't require any top-up from my own salary.
If I was to buy a third property... (property c) which I now have the equity in the other two properties to do and are looking in to (hence my reasoning for asking a question)... I could cover the mortgage and expenses if it was empty, as long as my other rental property was tenanted.
However - say I couldn't find tenants for both rental properties and interest rates rise to 8-10%, I 'could' cover all the expenses and mortgage.... but only just! - I'd be scrapping the bones of my bum to live.
The third property would be cash flow positive (part of my buying criteria), so as soon as one of the two rental properties were tenanted I would be right again.
I guess I have to consider the chances that two properties will be left empty at the same time between tenancies, and any major R&M that needs to be considered. The other thing I'm considering is putting in place say a $5k cash fund for rental contingency only (before buying a third property - although it is tempting to use this now and reduce the mortgage).
I'm pretty sure I won't be the only person out there with this problem... I know several people using this forum will have >3 rental properties and to those people I ask, when you are buying a property to expand your portfolio do you consider the worst case scenario of having all your properties empty at the same time and interest rates rising?
The other option is to wait... yes I'm the first to admit I don't have much patience... reduce current debt so that the properties become more cash flow positive and then there is greater cash flow to cover other mortgage payments. However, there are certainly some good deals out there I am picking up on at the moment. (n.b. I am more interested in cash flow than any capital gain - if in 30 years I am mortgage free I will stay have my rents as cash flow and a passive income to live off!)
I would appreciate other people's thoughts towards this topic and any ideas or suggestions on moving forward.
I am also interested to hear if maybe a different strategy of buy, do up, sell is maybe a better strategy to take to start off with, in order to build a solid equity foundation to then invest with??
Go the All Blacks!
I am looking at buying a third rental property - my strategy is to never sell and eventually build a big property portfolio that I can retire on from a passive income (a long way to go yet!).
I only have two properties now (live in one, and rent out the other).
If mortgage rates where to rise to say 8-10% and my tenants moved out, I could still quite easily cover the mortgage and all expenses for both properties. The current rental property is cash flow positive and doesn't require any top-up from my own salary.
If I was to buy a third property... (property c) which I now have the equity in the other two properties to do and are looking in to (hence my reasoning for asking a question)... I could cover the mortgage and expenses if it was empty, as long as my other rental property was tenanted.
However - say I couldn't find tenants for both rental properties and interest rates rise to 8-10%, I 'could' cover all the expenses and mortgage.... but only just! - I'd be scrapping the bones of my bum to live.
The third property would be cash flow positive (part of my buying criteria), so as soon as one of the two rental properties were tenanted I would be right again.
I guess I have to consider the chances that two properties will be left empty at the same time between tenancies, and any major R&M that needs to be considered. The other thing I'm considering is putting in place say a $5k cash fund for rental contingency only (before buying a third property - although it is tempting to use this now and reduce the mortgage).
I'm pretty sure I won't be the only person out there with this problem... I know several people using this forum will have >3 rental properties and to those people I ask, when you are buying a property to expand your portfolio do you consider the worst case scenario of having all your properties empty at the same time and interest rates rising?
The other option is to wait... yes I'm the first to admit I don't have much patience... reduce current debt so that the properties become more cash flow positive and then there is greater cash flow to cover other mortgage payments. However, there are certainly some good deals out there I am picking up on at the moment. (n.b. I am more interested in cash flow than any capital gain - if in 30 years I am mortgage free I will stay have my rents as cash flow and a passive income to live off!)
I would appreciate other people's thoughts towards this topic and any ideas or suggestions on moving forward.
I am also interested to hear if maybe a different strategy of buy, do up, sell is maybe a better strategy to take to start off with, in order to build a solid equity foundation to then invest with??
Go the All Blacks!
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