Investor News

Got equity? Perhaps you need a line of credit… darling lets get into more debt

It’s a nervous time around the world as we watch Europe’s continuing debt woes unfold. Financial instability could well mean that a credit squeeze is looming, both overseas and closer to home. While everyone hopes for the best, investors should prepare for the worst, according to Gavin Hegney of Hegney Property Group.

This means anyone with equity in their property right now should be obtaining lines of credit. In other words, now is a good time to have some cash in your bank account in case those bargains appear next year. This is because getting loans might soon become much harder, but those with cash will have plenty of buying power.

“You won’t be competing against other buyers if the worst case scenario does happen,” Hegney says.

“It’s just a huge opportunity for those that have lines of credit in place.”

He adds you can draw a line of credit, then put it into a deposit account and offset it against your other loans, so it won’t actually cost you anything.

“Those who have the money will be able to buy assets and anyone in a position where they can get credit today should do so. It’s a strength to be able to borrow.”

Hegney points out there’s been a lot of talk about interest rates falling and whether or not now is a good time to lock in interest rates. However, the risk of a credit squeeze, if Europe’s economy falls apart, should be what investors really focus on.

“The risk to Australia isn’t the price of money or the interest rate, it’s the availability of money.”

It’s also important that investors don’t panic in the current climate, he says. In fact, some banks are now offering interest rates around six per cent, which is “an absolute bargain” according to Hegney.

“The RBA (Reserve Bank of Australia) never drops interest rates just once, so I’m expecting interest rates to fall 25 to 30 per cent over the next 12 to 18 months. It’s likely rates will reduce by at least one per cent, that’s the normal behaviour of the RBA. They never drop interest rates just once.”

Source:  Australian Property Investor Magazine

AREAP Comments:

• Oh yeh good idea use all the equity in your property to gain a line of credit (more debt)
• Then watch the value of your property drop, until you owe more than the value of your house.
• Aagh look at what millions of Americans did.  They took out too much debt, then watched house prices fall, until they were living with negative equity.
• Good idea.
• Go for it and accumulate as much debt as your lender will permit.
• Borrow too much, while house assets are falling in value and then you may not able to repay your debt.
• Crazy days….

Related Stories:

• BIS Shrapnel spruiking the Perth market again predicting strong growth in 2012-2014
• Perth the next hotspot in Australia don’t miss out

Here’s some Hegney Group Stories from 2006 to 2011.

• 2011 promoting the Hegney property buyers advocacy service
• Jan 2011 Now’s the time to buy Perth
• Nov 2010 some pockets (suburbs) are back at 2005 price levels. Hegney said real estate remained a solid investment.
• Feb 2010  “House and land packages will dry up very, very quickly. I believe they are too cheap.
• Jan 2010  Mr Hegney said rental returns of 4 and 5 per cent were luring investors back into the property market this year. (hey 40,000 investors have exited the market according to the ATO)
• Sept 2009 the Perth property market is primed, pumped and ready to go.
• 2008  With the phrase ‘boom times’ being bandied about like never before, it’s as important a time as ever to be knowledgeable about the real estate market.
• 2007 In recent times, the Perth property market has been operating on a higher plane than other Australian states.
• 2006 tick tick boom how to find a hotspot before everyone else does
• 2006  Five months into 2006,  Perth continues to be the star performer of the Australian residential market.  But is this growth sustainable?  Gavin Hegney of Perth-based firm Hegney Property Valuers thinks so.