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Old 09-09-2013, 09:36 AM
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In investments, the most important aspect you have to take seriously is risk management. Have you heard of the term "tail risk". You have to consider this in your investments. Look at the worst case scenario. Here are your worst case scenario.

1. Both you and your wife loses your job. In this uncertain global environment, this is not impossible. Just ask around you, the seniors who have gone through tough times. Btw, which sector are you working in? If you are in cyclical sectors, you are at a highest risk.

2. Both your condos have no tenants. Even though, you could rent at rock bottom rents, there are simply no tenants as the flow of FTs just stopped and reduced big time.

3. The value of your properties collapsed, which means you are stuck as you cannot sell. There are no buyers at all. The banks will foreclose your property.

4. Your combined salary of $12k a month is of no comfort if you have to service $5k a month in mortgages, while you still have to meet monthly household expenses of $9k.

Not sure who is your financial advisor. I will fire him immediately if I were you. Or perhaps you are fooled by the many property agents and property seminars that persuaded you to leverage up?



Quote:
Originally Posted by Unregistered View Post
Have those who walked the path before also been at a similar risk position at one time or another during your journey?

I calculated I have 200k buffer to meet any increase in interest rates and since we are still working and all rental excesses are saved, if rental market soften, we have no issues renting on the cheap since my breakeven rent is pretty low. I think we can be very very competitive in rental rate if that happens as we bought the properties before the period of escalating prices.

I think if the following happens we can get caught out:

Interest Rates to be above 5% from current
Rental drop by more than 50%
Property price remaining for long sustained period of time (say > 5 years)

Otherwise should not we take this manageable risk and build our wealth?


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