They Don't Listen......or Leaving it too Late

This may be a bit of a rant, so warning to all. Also @Simon Hampel not really sure where to put this, so please put in the right section. It's not really 'where to buy', more 'when to buy'.

So, quite a few years ago, a person we knew wanted to get into property. Person A....Young, single, large deposit, but not a great income. We offered to help them out, and actually helped them score a deal for a 3 bedroom home in a housing department area for $175k with large land. Average condition, but needed some work done on the front door. We offered to fix it for them....no cost, only materials. This was a great deal at the time, and home would have more than tripled in price today. They got cold feet and didn't go ahead. We would have bought it, but were maxed out at the time.

Not long after a friend, suggested that this person purchase a townhouse, near a station not too far from the house. It cost $215k and wasn't a great deal at all, but because this 'close friend' and 'successful investor' suggested it, they purchased.

Time moves on, and this person now has a partner...Person B. We suggested they purchase a house, not far from where we are, which would be a reasonable quality, and was before current boom, but we have to save for a wedding. They looked at a few of the suggestions, but didn't take any action. We also offered for them to purchase a home that we flipped, after we'd renovated it, and for less than we flipped it for, but they didn't take us up on it.

So now, person A isn't very well, and can not work. Person B works full time, but is tied to some kind of friendship that has formed with the boss. They are paid very poorly for someone with the specific skills they have, but are scared to move onto a different employer.

A townhouse came up for sale in the block they live in, and had no online presence, not even the Agent's own website. The only sign it was for sale, was a signboard out the front of the complex. Person A told me about this, after the sign had been sitting there for maybe 6-8 weeks. They had called the agent & he didn't return calls. I get onto the agent and eventually book an inspection. It's the only inspection this place had. Person A was upset because the price was so low, saying that 'they always sell for low prices' in that particular complex, proving that their own place had been a poor investment, so I do some digging.

Over the last few years, prior to 2019, prices had been moving up nicely, then they dropped back. Although this person knows about property cycles, they obviously hadn't really taken much of it in. By my estimate, it was worth reasonably more than the asking price, but as there had been 'no interest' in the property we decided to low ball & if they came to the party, we'd purchase it. We did!

So, just yesterday, Person A calls to say that another townhouse in the complex is for sale, and asking price is around $100k more than we paid only a few months ago. Well, that was no surprise, and it's not as nice as ours after a cheap reno, but this has now spurred Person A to once again look for property, possibly thinking that if they sell their place they'd have a good deposit. After scrolling through RE.Com, they've now come to the conclusion that they are now priced out of ever buying a house. I shake my head. They KNOW how this works. They know several people that invest. They've been offered help more than once......And they do nothing.

On the plus side for us, we've got a townhouse for over $100k less than the true valuation, renting for over 5% of purchase price in the outskirts of Sydney during a boom. We may sell next year, but will keep an eye on the market, as it's so close to the station, in an area that is having a lot of interest, and once the uni students come back may improve even more. If values don't go up more, we'll sell, which only really cost us around $9k to spruce up, and a couple of weeks work. After 12 months it will be $50k CG split between us, so only $25k each added to our income to pay CGT on.

 

Thanks for sharing @skater - super insightful and educational. Food for thought.

 

He who hesitates is lost. Period.

I wish I were Person A and had a mentor like you @skater! I would be many times better off in my property journey.

 

You can lead a horse to water, can't make it drink!

This reminds me of a story where a young fella wanted to purchase a property at the beginning of the last Perth boom and had issues with his credit file so had to use a nonconforming lender and his uncle told him the rate was too high so he didn't proceed.

I explained the opportunity loss if he chose not to proceed and it didn't get through and he lost out on circa 100k equity over the next 6-12 months.

 

When you keep missing opportunities because you want to avoid risk.....
Do you really understand what risk is?

 

So frustrating!
When i was buying so many people said "I'd like to do that" but none did.

A friends daughter lives at home and saves a lot. I suggested years ago she but something but mum said she was not thinking of moving. I explained how it works, rent it out etc. "but tenants will trash it" came the reply.
I tried again this year. Waste of time. I know in a few years time she'll be on Facebook complaining about how young ones cant afford a home these days.

 

Risk and investment will always be inherently linked. You just need to accept it and dive in or don’t! Some people will always find a reason not to. Just don’t complain when you miss the boat.
Extremely frustrating when you try and help!

 

Oh, dear. That reminds me of a Facebook 'friend' I have. Was a real friend in real life, maybe 20 years ago, but is now early 40's living at home with mother AND teenage son in a TWO BEDROOM UNIT. Always on Facebook, complaining about how unfair it is that she can't buy a house in the Shire and how 'they should do something about affordability' and you should be able to afford to buy a house where you want to live. She's just now playing the waiting game until dear old mother passes on (only child).

History with this one is that way back when you could buy houses for around $200k out this way, we suggested that she buy one. The excuses came thick and fast about how she would never lower herself to live out here. We said, you don't even have to live in it. Rent it out (positive cashflow at that point in time), and in roughly X number of years it should be worth around double the price, and you can then use that, to buy somewhere else. She knew we had property, BTW, so this was someone who should have taken notice. Anyway, she didn't do it.

She continues at home with mother dearest & small son until it becomes a little awkward sharing a room with your son as he starts to mature. She now has to share with her mother, so that the son has some privacy. She's desperate, and needs three bedrooms urgently, lots more posts about how unfair life is...you know how it goes. So again we offer help.

Solution 1) OK, so the two bedroom unit is owned outright. Sell, it and buy a three bedroom one. The mortgage is affordable, and you get exactly what you need a bedroom for each of you. "Oh no, we can't do that. This unit is Mum's".

Solution 2) Rent a three bedroom unit, and put tenants into your unit. The additional cost is negligable and you get to keep Mum's unit. "What? I'm not going to pay off someone else's mortgage".

Not providing anything helpful at all anymore, because, apparently I'm not helpful. Stay in a 2 bedroom unit with your aging mother and your teenage son. Just stop complaining.

 

The inherent problem always, always, always comes back to mindset, or more precisely, not developing a mindset conducive to building any wealth.

Then you also get your garden variety of doom and gloomers, the entitled brigade and my personal favourite.... the anti stamp duty folks. " i refuse to buy because of the stamp duty grab by the government".


When I was back in high school my best mate's parents were renting. The mother had a good income as a speech therapist at the time. She would often by those raffle tickets to win a home.. her dream was to own a home and retire early. I remember those tickets were like $25 a pop back then. Husband had a good income too as an engineer.

Fast forward 21 years and they're still renting and working harder than ever.

 

Yep, we have a family member like this. Only a few years younger than us, and endlessly complains about how life is unfair and property in Sydney is unaffordable etc. Meanwhile they could magically "afford" to take trips overseas, dine at hatted restaurants, and buy all the latest and best of everything.

While this family member (who I will refer to as family member 1) wasted their money on luxury items, and moved into their 30s without owning a home, family member 2, who was in their 20s, bought their first house in Sydney. Family member 2 earnt less money than family member 1, but saved up their money by living sensibly. They did not take trips overseas, dine at hatted restaurants, or buy all the latest expensive gear.

Family member 2 is now in their 30s, and has subsequently bought a second house and retained the first house as an IP. Family member 2 worked hard and also has a much better and much higher paying job than family member 1 now.

Family member 1 is now nearing 40, and eventually declared that it was impossible for a first home buyer to buy a house in Sydney. They bought a cheap house in a far away country area and moved there. Family member's partner does not work, so the new complaint is that life is unfair because there are not enough jobs. There actually are jobs, but it would be a job working in a shop or similar, and the partner could not tolerate debasing herself like that. Oh, and the government should also give them free money because it's not fair that they can't afford trips to Europe anymore.

 

This. People think there are two options: taking risk by buying, or not taking on any risk by sitting on the fence.

What they don't realise is there is no such thing as sitting on the fence - if you have $500k cash and the market doubles, your deposit has now halved. How is that not risk?

The decision not to buy is identical to the decision to buy. It's the same bet, but in a different direction. In life there are no fences to sit on. Everyone makes a bet, regardless of whether they are conscious of it.

 

I hate it when people just refuse to drop an idea even if you prove to them they are outright wrong.

A classic example is rentvestment. All my friends call rent dead money. I said but if you rent, you can actually borrow more money - in my case I squeezed out two extra properties that I would have been able to service if I was living in one of my properties as a PPOR. When both double, I get a free house. I showed them the math, and said in some situations, rent money is not dead money, it's actually better than PPOR money.

I run through the calcs. I show them the irrefutable proof.

5 mins later: "but...but...rent money is dead money"

Sigh. They've heard this (incorrect) expression and just mindlessly parrot it, without really questioning it. And when they're shown the "way", they still default back to this way of thinking because its, well, comfortable.

As you said - a bad mindset that they refuse to let go of.

 

Haha, I get the expensive holidays. This person has been everywhere too.

 

Very true. Many years ago I had another very good friend who asked why I would take on so much risk. I explained that there's always risk, but it was minimal, and I asked why they still rented, and the reply was that he was scared to be in so much debt. I explained the repayments, and that it would be a similar repayment as he was currently paying in rent, but he'd eventually own it. Anyway, not to long after than conversation, he did buy a place, so not sure if that was due to our talk or not, but happy that he did at least buy a PPOR.

 

It's always the government's fault. When you don't take responsibility and blame yourself, then you can never learn because, well, it wasn't your fault...so what's there to learn? Every time I f-up, I will be hard on myself and eat it. It's my fault, I always assume it's my fault, at least by default.

 

I understand the argument that rent money is dead money. It's that phrase that will get some people to at least buy a PPOR. Sure, they may not invest, but at the very least they will eventually own one property, I guess.

 

That's just really one random example. The point really is about when people are shown a better way but refuse to even think about it.

 

I understand. I get so frustrated when there's excuse, after excuse though.

 

Problem is people are taught make money = good, lose money = bad. That sort of simple binary just doesnt work.

 

It's true. You can't learn from a mistake that you don't acknowledge.