Based on the timeline and frequency of Australia’s downturn, financial crashes can be pretty common. The country has experienced a recession in the 60s, 70s, 80s, 90s and the 2000s. There has been a downturn every decade and you should talk to a financial advisor in Perth to prepare yourselves in the event that history repeats itself.
To reduce your risk as a property investor, you should analyse how the area you want to invest in has performed in the past few years and decades. This will give you an idea how the area has performed over several property cycles.
Make sure the property has an above average capital growth. How do you think the area will perform in case of a downturn or recession? You can tell by checking if the area has employment hubs, property demand and jobs growth for it to be a strong investor market where people don’t have to sell in times of crisis. There should be a high owner occupier percentage who will wait it out and not sell their properties.
You should also have a financial buffer to be prepared not only for a downturn but also for emergencies such as job cuts, health issues or unforeseen situations. A good financial buffer must be able to sustain you and hold your properties for about three to five years.
Compounding power is important and if you sell a property, it will be a step backwards. The momentum will be lost and you would have to pay for fees and taxes. Remember that during a recession, financial institutions are hesitant to lend and access to finance is harder.
Financial crashes are difficult to think of but it is part of the risk of investing. As a property investor, you should arm yourself to reduce the risks so you can withstand any cycle stage. Futureproof your portfolios with high quality assets and consult your financial advisor in Perth.
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