There are times that it's wise to use counterintuitive tips to protect yourself against making the wrong choice during a downturn, like in the case of the current Sydney property market. According to reports, auction clearance rates are dropping, and the listing of properties for sale has dramatically increased as well. You should review your strategies amid tightening lending policies and the market slowdown to avoid losses and instead, strengthen your portfolio.
It may be best to wait it out even if you always want to be in action
The market is currently uncertain so just sitting still and observing may benefit you. It's also important for investors to know when to hold off buying.
You may also choose to reduce your overall loan to value ratio
High LVR loans have benefits such as being able to spread your money to buy more properties and build your portfolio faster. A high level of debt against properties makes you vulnerable during uncertain times. If you reduce your debts by paying a higher deposit or extra payments, you reduce your risks when interest rates increase again. The banks will also consider you as a low-risk borrower.
You may also want to consider paying principal and interest repayments on your mortgage
You would have to pay higher mortgage repayments and won't be able to claim a tax deduction on the principal, but it will lower your risk by allowing you to pay off your mortgage faster. Doing so will also increase your equity faster.
Besides, the banks are tightening their regulations on interest only loans. Some have increased their mortgage interest rates on interest only loans and cut their rates on principal and interest loans. The interest rates may increase next year, so now is the time to consider P&I repayments.
Lastly, it may be smart to hold off renovating your property
You may want to increase your property's value by an upgrade, but during economic uncertainties, tenants aren't often looking for a nicer rental home. This means you may not substantially increase your rental yield or capital gains. Make sure your property is still in a rentable condition but wait until the Sydney property market stabilises and rises again before you make any significant upgrades.
Original link: http://www.apimagazine.com.au/property-investment/counterintuitive-tips-to-strengthen-your-property-portfolio