Be prepared is the notorious Scout's motto, and it's never more true than when dealing with the huge financial investment that comes with property, failure to prepare can lead to foreclosure, bankruptcy or worse. You shouldn't let this deter you however, preparation and knowledge can significantly reduce risk. Adaptability is key in any plan, you need to recognize potential threats and opportunities and know that they won't unhinge your investment.
The best safety buffer in all honesty is to be conservative with your budget, if you're burning all your income on your mortgage and the day job goes under, you could be financially crippled. It's a balancing act of risk vs reward. Some of the more risky options could be investing in short-term high growth areas like mining towns for instance Port Hedland or the Hawsons Iron Ore Project 60km south west of Broken Hill which currently has quite good rental yield, a very low vacancy rate but low capital growth and a declining population.
A closer look reveals LendLease is going to spend $40million building a shopping plaza, Carpentaria Exploration made their announcement about Hawsons in mid-December and then there is also the new Silverton Wind Farm project and its $2.2billion worth of investment which is the kind of cash injection that could turn property prices around as highly paid miners flood the area, if a big company is willing to bet big money, it's usually a good sign.
It should be said that nothing is set in stone, any one of these companies could encounter trouble and cancel their project leaving you with a worthless property in a dead-end town. Damon Nagel, managing director of property investment advisory firm Ironfish, recommends that investors who adopt a long-term view and strive to build a balanced portfolio will achieve the most success. He stresses the importance of strategy
"From the outset, adopt a clearly defined strategy and aim to build a portfolio that will meet your objectives," he says. Property investment can be broken down into three distinct phases - growth, consolidation and income realisation - and your objectives will determine the strategy and the types of property in which you choose to invest.