What happens if interest rates keep rising, won’t
possitive cash flow returns become negative.[?][?]Absolutely possible.
If interest rates continue to rise and your interest repayments go up, they will eat into your positive cash flow. Eat enough of it and it won’t be positive anymore. Your ‘profit in the hand’ will become an ‘out of pocket expense'[
]I am planning for the future. Build in a buffer. Decide where you think interest rates may end up – eg 8%, 10% whatever, and do your prepurchase sums using the higher figures you predict for the future. This will tell you where you may be at if rates do indeed go higher and higher.[
]If you follow the 11 second solution then interest rates can go up to 10.4% before it becomes – cashflow. That’s a pretty good buffer considering by that time most other people would have suffered – cashflow by that time
Nu Gen
i agree with both Castle Dreamer and Nu Gen, but if you can see the interest rates risin and not going above a set buffer you decide you should be fine.
But for me personally, i cant wait for the interest rates to rise, its gonna make people who went out and bought a house and are just making repayments but if interest rates rise, that means theres gonna be some hot property on the market then.
Which would make a perfect time to buy some real HOT property!
nu gen,
your properties will probably be -ve cashflow before interest rates reach 10.4%. You’ve only allowed for the interest expense, what about rates, vacancies, management fees, insurance, repairs etc.
Rod.
Hi All
In fact some properties are already cashflow -ve if you use the 11 sec rule.The first house Steve bought and uses as an example in his book would be cashflow neg if you use the 11 sec rule.So people need to be factoring in higher interest rates now to make sure their properties stay +ve.
Erikanu gen,
your properties will probably be -ve cashflow before interest rates reach 10.4%. You’ve only allowed for the interest expense, what about rates, vacancies, management fees, insurance, repairs etc.
Rod.
RodC
You are right. i forgot to ad that into the equation.
Basically the point I am trying to make is the more + the cashflow is the better position you will be in.Nu Gen
If you fix your rates then it isn’t too much of an issue. I fixed mine at 5.89% for three years for settlement next week. I found it does give an element of peace of mind.
Looks like fixed rates are going up accross the board on Mon by 0.25%.
Fortunate for those borrowers who have their application in and rate locked!
Cheers
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
hi[
]Sure, pick your landlords insurance policy well but….. we got caught by not checking up on the property manager. Our first ip in case you hadn’t guessed! The property came with tenants, the property managers weren’t very diligent and didn’t ” get around” to doing a new lease between us and the tenants for the first month whereupon the tenants left in the night owing a months rent. Ah, that’s what landlord’s insurance is for right? Not if you don’t have a signed lease with your tenant, it becomes null and void. So look over your property managers shoulder and make sure all the necessary paperwork is done. Have fun.
AlexI’m with still in school!
Let the int rates rise, then we’ll see some NICE properties on the market,
Fudge111[
][8D]Ps Sorry if I have offended any people who will have to sell due to int rate rises
i agree with both Castle Dreamer and Nu Gen, but if you can see the interest rates risin and not going above a set buffer you decide you should be fine.But for me personally, i cant wait for the interest rates to rise, its gonna make people who went out and bought a house and are just making repayments but if interest rates rise, that means theres gonna be some hot property on the market then.
Which would make a perfect time to buy some real HOT property!
But wouldnt this mean that property prices will go down therefore ones equity wouldnt in some cases allow them to borrow to buy more properties..that is unless you already have ready cash on head
Probably right there christine
However, in our case, we are still at uni and will start investing in about 2 years, perfect timimg i would say, so i would love int rates to go up for 3 reasons
1) Property prices will go down due to more supply than demand
2) More HOT properties will be forced into the market.
3) Our plan is based around paying off properties quick smart, 3 years or less, so int rates won’t affect us as much.Fudge111[
]
Probably right there christineHowever, in our case, we are still at uni and will start investing in about 2 years, perfect timimg i would say, so i would love int rates to go up for 3 reasons
1) Property prices will go down due to more supply than demand
2) More HOT properties will be forced into the market.
3) Our plan is based around paying off properties quick smart, 3 years or less, so int rates won’t affect us as much.Fudge111[
]good for you..my son is in the same boat..just finished uni and is looking to buy his first property..and if i have any equity left after properties have drop i would love to help him out
Probably right there christineHowever, in our case, we are still at uni and will start investing in about 2 years, perfect timimg i would say, so i would love int rates to go up for 3 reasons
1) Property prices will go down due to more supply than demand
2) More HOT properties will be forced into the market.
3) Our plan is based around paying off properties quick smart, 3 years or less, so int rates won’t affect us as much.Fudge111[
]good for you..my son is in the same boat..just finished uni and is looking to buy his first property..and if i have any equity left after properties have drop i would love to help him out
“If you fix your rates then it isn’t too much of an issue. I fixed mine at 5.89% for three years for settlement next week. I found it does give an element of peace of mind.”???
MortageHunter,
I always thought rates were set at the day of settlement. The offer ususally being market less discount. Please advise if I’m mistaken.Regards Joy
Let the interest rates rise….. Sorry if anyone is offened by that, but if you got some cash or equity lying around and you can lockn a low fixed interest rate, you be fine and laughing. [
][[] Grab all the HOT PROPERTIES you can!
]
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][8D]
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