B Invested

THE RECESSION PROOF PROPERTY PORTFOLIO – HOW TO THRIVE IN A CRASH

 

For investors who have minimised risk while building a well-balanced recession proof portfolio of investment properties, a downturn in property prices shouldn’t have them squeezed into a corner.

 

Those who are well-educated and prepared to take action will be able to make the most from the opportunities available during times of market downturn. These can be some of the best times to make money!

 

By  being active when many others are doing anything to get out, you can pick up some great deals. But you have to be in the right position to be able to do this.

BREAD AND BUTTER PROPERTIES HAVE GREATER IMMUNITY

During the GFC, it was the high end of market that went backwards. More affordable properties or areas which hadn’t peaked didn’t feel the squeeze like Luxury properties and boom markets did.

 

The principle is pretty simple, if you feel the crunch and need to sell your Porsche, then you will look for something more affordable to drive.

 

It’s the same with properties – while there may not always be bucket loads of people wanting to purchase a trendy inner city apartment, there will always be families looking for basic and affordable housing.

 

This is why bread and butter properties are fundamental to the stability of a good foundation portfolio.

 

THE IMPORTANCE OF MINIMISING RISK

For investors who have paid less than market value to purchase neutral to positive cash flow properties that are situated in good growth areas, the effects of a price crash in OTP properties are likely to be small, if any at all.

 

BY PAYING LESS THAN MARKET VALUE, YOU ARE CREATING A BUFFER

If shit hits the fan and you need to sell, this buffer will protect you against a discounted selling price or selling costs.

 

If you paid market price or more and had to sell suddenly, you would definitely lose money on the way out.

 

A NEUTRAL CASH FLOW MEANS THE PROPERTY IS PAYING FOR ITSELF

Say you paid an inflated purchase price on a negatively geared property and then lost your job. What would you do? You would probably have to sell it to survive – and lose money in the process.

 

On the other hand, if you owned a property that had a neutral to positive cash flow, you would be in a better position to hold onto it if you lost your job as it should be paying for itself.

 

A GOOD GROWTH LOCATION ENSURES A BETTER CHANCE OF DEMAND

Properties situated in metropolitan areas generally have a higher chance at achieving consistent growth. Capital city markets have a higher population and a higher rate of population growth than most regional centres.

 

Regional areas that are dependent on one or two “boom” industries don’t offer good growth prospects. They are more likely to go bust when the wider economy loses steam.

 

ALWAYS BE THINKING ABOUT YOUR NEXT PURCHASE

If you have just bought a property, you should already be thinking about your next purchase. What do you need to do to get your next deposit or improve your serviceability to get finance to buy again?

 

Don’t get complacent and relax back into your comfort zone. Because if you do, you probably won’t be ready to take advantage of a big opportunity when it comes your way.

 

HAVING THE RIGHT TEAM AROUND YOU

It pays to have the right team of professionals around you. Having the right team partnering with you over the course of your investing means you will have access to guidance and the best strategies to thrive when faced with economic uncertainty.

 

Don’t get done under by glorified sales people who have only made money during boom periods. A truly successful investor will be able to make money during market downturns too – and show you how to thrive under the same conditions. Thanks to my recession proof property portfolio, I managed to pick up some crazy bargains in the wake of the GFC, when most people were saying you couldn’t make any money in real estate.

 

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