interesting perspective on pos cash flow prop

I was thinking to myself today how many people will be caught up in this trap...I myself have properties and am currently sitting in this position, however I have planned for the change and can withstand the change of interest rates.

My thinking is this:

- People are buying up property at the moment that are positive cash flow advertised, or on paper.
i.e purchase 300k, receive 350 per week. all sounds dandy with interest averages of 5.00%, equates to 289 per week and therefor 61 dollars profit per week.
- what happens when these properties suddenly have increased interest rates of 2%, which will be very possible when the uptrend in the economy recovers, and if you are to fix the rate at the moment, you'd most likely get 6.8%+ on a 5-10 year that would even make going fixed worth it.
- now if the rates go back to 7%, which will be highly likely, you are looking at 300k loan, rental income, lets say increases by 25 to 375, 7% interest equates to 404, so total position is now -29, now lets include all maintenance costs, management costs and any other costs included.
- can you support your position, what about loss of job, or decrease in value of the property, or further interest rate hikes due to inflation taking it over 7%.

so how many people will be caught in the trap of thinking they are making money from their buy, yes you can make positive cash flow properties work, i.e. if it is positive at around 7% rates.

any opinions on this?

p.s. Money can be made in any market, people get rich from bears as well as bulls. :)

cheers,
miike