Long Term Landlords & Property Investors Shouldn’t Fear A Crash

One likes to watch the casserole slowly stew, while the other likes to barbeque the fillets on full heat. That’s the difference between a short and long term investor. Both can potentially be a satisfying meal, but the short-term investor is looking to get satisfied a little quicker while the long-term investor is happy for nature to take its course, even if that means taking a few knocks along the way.

It’s the short-term investors that twiddle their fingers and worry about a melt down in the property market. Short-termers, as I like to call them, don’t hang onto properties for long. They like quick turn-arounds, meaning they don’t have a huge margin of time to play with. It’s a rapid, yet powerful way of generating a huge chunk of change. However, if the market collapses or anticipation of a rough patch is lurking during the flipping stage, they could start to feel the burn. It’s at that point when they could find themselves in a situation where they either have to sell at a loss or hold onto the property longer than planned.

Being in the armchair of a long term investor allows me to stay on track regardless of a property crash, and here is why:

1) One of my mortgages will be cleared in less than 15 years by rental income, and the others with in 20. The condition of the market is unlikely to disrupt my target. Those with a repayment mortgage will reap the same rewards. If there is a crash, demand for rental properties will drop but there will always still be people wanting to rent.

2) History has shown that after 10 years a property will double in price, that’s even after suffering a crash.

House Price Crash Graph

3) As a long-term investor I’m looking to clear my mortgage balance with rental income. After my mortgage balance is cleared, everything I receive from rent will be profit. At that point, it definitely won’t matter which way the market turns.

4) Long term property investments are tailored for blips in the sense that over a 25yr period there is plenty of time to recover. If a blip occurs at the later stage of the period, as already mentioned, appreciation on property should still leave room for profit.

So there you have it. I don’t think I have anything to worry about, do you? I pay no minds when people tell me that property investment is a lost cause. It’s only a lost cause if you’re too lazy to see the bigger picture.

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1 Comments- Join The Conversation...

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DrBubb 2nd August, 2008 @ 18:57

Too bad. You got it wrong here.

You would have done better to read up on long term property cycles.

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