Bubble proof your portfolio

Lots of people talk about the real estate bubble bursting, the media in particular love to report on this particular topic. I personally don't think the real estate bubble is going to burst for several reasons. However, on the off chance that it does, there are some things you can do to prepare yourself:

1. Fix your interest rate
   Many investors have opted for a variable interest rate, which means if interest rates move up significantly, then monthly mortgage payments could become crippling. Fixing the interest rates takes one variable out of the equation.
2. Build up some cash reserves
   As we drift inexorably towards a cashless society, we tend to think that not needing cash to pay for goods is synonymous with not needing cash in the bank. Most Australians live way beyond their incomes. If times ever do get tough, cash will indeed be king - not so much for your existing portfolio, but to buy the real estate being abandoned by investors with short-sightedness.
3. Make improvements to your properties
   Improving your properties serves two purposes: it will enable you to maximise your cash flow now, and make it easier to retain or find tenants in case times get tough.
4. Maintain a professional relationship with your tenants
   Be fair but firm, friendly but not familiar. When tenants become friends with their landlords, then during times of financial stress, the tenants will have no compunction asking - or just expecting - their friend to waive the rent.

5. Always remember that even if there is a bust, it will be followed by a boom
   Each peak is higher than the previous peak, and each trough is higher than the previous trough. While everyone wants to buy low and sell high, many investors end up selling low because they are caught short by a down-turn, no matter how slight it is. If prices come off the top by 10 percent, many people feel they have to sell their properties, even if they enjoyed a 150 percent increase in value leading up to the 10 percent decline. Keep it all in perspective. And remember that in time, prices will have doubled again.