That sinking feeling you get when you watch property values start to plunge – it can make you feel helpless. But there are steps you can take to help put you back in control of your property investment strategy.

Like thousands of other investors, you may own a property in Sydney or Melbourne and have high hopes of seeing a large return within the next few years. But the prices are beginning to fall and it looks like this drop could continue.

If you’ve loaded up on multiple investment properties, then you may especially feel the squeeze on your cash flow. You may even have doubts about your entire investment strategy.

What should you do now?

Most importantly, don’t panic! Making a decision based on emotion or a temporary market trend is a bad idea. Remember that property investing is like running a long-distance race full of ups and downs. While there may be a chance you will see a profitable return in the long-run, you may have to weather a few setbacks and scares to reach that point.

Before you do anything with your investment property, take a moment to carefully consider your situation.

Revisit your investment strategy

Go back to your wealth strategy. Do you have a plan for this situation? Are your investments diversified, so you can offset losses for a period? Can you wait this out? Or are you feeling the strain and need to take action?

Now is the perfect time to take a step back and take an objective look at your situation. Remind yourself what your specific individual investment goals are. Try to keep an event like plummeting market values in perspective with the mid to long term in mind.

Your best option may be to simply stay put and weather the market downturn. As long as you can afford to keep making payments on your loan and have reliable tenants paying rent, then there’s not much more you can or should do.

But riding out the storm and waiting for the market to recover may not be an option for everyone.

Plan ahead

For some investors, holding onto a property that’s losing value can be a risk they simply cannot afford. If you can’t handle the mental strain of knowing that your property is tanking and you can’t see much hope of recovery, then you might feel better to free yourself of the responsibility. You can simply accept the loss as it stands and turn your focus to other investments and possibilities that are easier for you to handle.

Before you quickly write off that property, however, it’s good to try to run a few projections. Try to get as clear a picture as possible of what the market will look like one, two, five or even ten years down the road. Anticipate whether you can afford to hold onto the property despite some loss over a period of several years. If you sell in haste, you could be passing up a huge return when the market eventually does recover.

Weigh the pros and cons

Instead of having an emotional reaction to a property market downturn, try to analyse the situation from a fact based point of view.

First, estimate how much you would lose if you sold the property right now as it is.

Next, try to calculate how much it will cost you to keep the property despite the decreasing value over the next several years. Don’t forget to factor in what you stand to gain should the market take a turn for the better!

Compare those two figures and determine which one is better for your situation.

Think about refinancing

To save money while your property value starts to dip, you can consider refinancing. Work with an experienced Adelaide mortgage broker (we can help here at Nitschke Nancarrow) to review your current loan and consolidate your debts to get you the best possible deal. If you haven’t reviewed your loans in the last couple of years, it is likely that you could secure a better deal that could save you hundreds of dollars a month.

Work to increase your property’s value

You don’t have to just sit around and watch your investment property’s value sink lower and lower. There may be something you can do to bring it back up. While you can’t change the market, you can make some adjustments to your property.

Consider making some cosmetic renovations to your investment property. They don’t have to be major or expensive ones; they just need to be smart changes. The right kinds of renovations could add tens of thousands of dollars to the value of your property.

Get the timing right

You’ve done your due diligence, you’ve done the maths; there’s just no way you can make this work. You can’t afford to hold onto a property with a value that’s dropping fast. You’ve decided to sell, but before you do even that, there’s still some more thinking to be done.

You need to figure out the best time to sell your property so that you lose as little money as possible from the investment. For example, if your investment property is in a beach side suburb, it will pay to sell in summer when interest is at peak, instead of the middle of winter. And broadly speaking, spring is a good time to put a property on the market.

Get advice today

If there’s one piece of advice you must take from this blog it is this: get expert advice! A savvy investment advisor and/or your accounting and financial planning team can give you a true understanding of where you are at. And even more, they can adjust your strategy and build you a plan to get around the challenges that the property market may bring.

So don’t stress, put it in the hands of a team of experts.

These experts are under our roof.

Contact Nitschke Nancarrow, experts in all aspects of accounting, financial planning, property investment and business. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.

– Kym Nitschke

The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s  interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.

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