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In This Video:

00:24 How Do We Manage Our Investment Risk?
01:03 Risk Management Plan

Good day guys, Nic Griffith here again. It’s been a while since my last blog. Great to be back. If you’re looking for property investment advice, property investment mentor or looking for some property investment strategies, then you’ve hit the right link.

One of the main questions I get asked a lot about from a lot of my clients is about risk management, how do we manage our investment risk. The number 1 thing I always tell them and I’ll tell you right now is there is no such thing as a risk free investment. Anyone who tells you that there is such a thing as a risk free investment, I’d be giving advice and maybe take a step back and be a bit hesitant about moving forward and do your own due diligence.

There are certainly ways that we can mitigate and minimize the risk with every investment we take. With all my properties and all the properties I’ve helped my clients into, I have a risk management plan. That plan identifies potential things that can go wrong and things that do go wrong with investment properties. However, we also identify ways to prevent that and ways to mitigate those things. I’ll run through 5 quick ones for you right now: vacancy rates, natural disasters, bad tenants, interest rates and potentially losing your source of income. These are serious risks that people should be and are aware of that can stop them from doing the right things they need to do to start their investment portfolio or to move forward.

Let’s have a look at those individually. Vacancy rates, there are certain ways to prevent and mitigate against vacancy. The first one is through the employment of a reputable property manager. They employ the right strategy to market your property at the right price and to the right market to minimize any vacancy gaps. The second one is don’t be greedy with your rent. I advise all my clients to put their property on the market for between 10 and 20 bucks under market value … That’s right, under market value … In order to attract tenants and get them in there as quick as you can. Also have a cash buffer. That’s another prevention method. With every property, have a cash buffer put aside should any vacancy rates occurs.

Natural disasters, simple, we just avoid areas that are prone to flood and fires. Additionally, as a mitigation strategy, we have the right insurances in place. We have flood insurance. We have termite insurance. We have fire insurance should we need it.

That’s something we help our clients with is making sure they’ve got the right insurance and instruction for that particular property.

We’d avoid bad tenants in 2 simple ways:

avoid certain areas of the market, generally the lower end of the market and again through employment of a competent and reputable property manager. Simple.

You can’t avoid interest rates. They’re part of the game. What we can do though is structure our portfolio in the right way. We can fix our interest rates so we know exactly what what we’re paying for the 3 or 5 years, and that’s a prevention measure.

Additionally we can mitigate against sort of interest rate rises by having that cash buffer there to accommodate that.

If we lose our source of income, lose our job, not a problem. We’ve made sure we’ve bought properties that are potentially negatively geared positive cash flow. Our portfolio is paying for itself. It doesn’t matter if we lose our job. Additionally, we have that cash buffer. That cash buffer is key. There’s just 5 quick examples of potential risks and risk management strategies.

If you like what you’ve heard here today, what we do is run a full day training, where we go into a lot more detail about things like risk management, finance, markets, what to buy, where to buy, all those sorts of things. If you’re interested in coming to one of our free training days, please go onto our website www.ipedu.com.au and click on the training tab to find the location closest to you. Look forward to seeing you there. Cheers.

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