Regardless of being a bull or a bear I find it a poor investment strategy to purchase another investment property in the present economy when he is obviously heavily exposed.
Good investing is minimizing risk when conditions worsen as they are at the moment, no one knows for certain that properties will go up or down but the signs are that it is going down therefore do not be in a position to have the bank demand more money you don't have.
Then if he has purchased without any conditions that enable him to get out is more bad judgement.
The people who are at the moment being hurt and will be hurt even more in the coming months are those that expose themselves with negative equity.
Finally does he have the guaranteed income to cover higher payments if he has, or can borrow more
I posted a Dunn & Bradstreet story recently regarding the plight of commercial problems in Australia which are an indication that housing will follow Link SMH
The data shows that the rate of failure for businesses with fewer than five employees jumped by 46 per cent from 2009 to 2010 (to just over 4000 firms), as late payments continued to squeeze smaller companies. Businesses with between six to 19 employees experienced a 20 per cent rise in failures (to just over 5700).
Those numbers eclipsed failure rates during the GFC, according to Dun & Bradstreet data, with about 7,500 Australian businesses going bust in 2008, and 8000 in 2009.
Late payments proved critical for many firms, with the average wait of 53 days. The number of payments more than 90 days overdue increased by more than 7 per cent in the December quarter.
