"Average" Joe Bloggs

[nads]

Thought I would post a little story that illustrates the importance of 1)thinking outside of the square and 2)doing your research!!

-A couple recently decided that they would purchase a new PPOR in a small country town, about 1hr30mins out of Melb.

-They did their "research" and decided to buy a nice property (not sure of size but quite big, on a generous block). This house is only a year old, and so fittings/fixtures etc...are brand new. Seen photos, looks fantastic.

-Their current PPOR is in a western suburb in Melbourne. They own the property outright.

-Couple decides to buy rural property for $250k.

-Couple takes out personal loan to help cover the deposit.

-Couple decides to sell current PPOR, they are hoping for low 300k, to cover rural property and a bit left over.

-Property goes up for auction. NOT A SINGLE BIDDER!!! Auctioneer starts bidding at $250k. Silence.

-Most people present at auction are nosey neighbours.

-Real estate agent claims that this is the third property the same day that has not sold at auction. Blames negative publicity re: possible interest rate rises; "bubble bursting" etc....

-I ask couple "have you had the house valued by an independent valuer?" Couple answer "one of Melbourne's newspapers reckons that the median house price in this area is $350k".

-Settlement date on new PPOR is early November.

-A person has expressed interest in renting out the property.

-Couple now thinking about negatively gearing their current PPOR.


It saddens me that they did not do their research, did not have an exit strategy in place, and did not base their decisions on facts.

This couple could have been ahead of the race, they OWNED their property (a relative left the property for them) and so have no mortgage.

Just goes to show just how the average Joe Bloggs thinks....very SCARY.

 

[XBenX]

With people like this out there its always possible to make $$$ on a deal.

 

[Desto]

I'm not sure if I should feel sorry for them.

It reminds me of the share boom days a few years ago. I was thinking of getting into it myself. While away on business in Singapore and trying to kill a very boring weekend, I decided to read up on this share investing thing that was all the rage.

So I browsed through a bookshop and came across a book called, "Streetsmart Guide to Valuing a Stock". In the first chapter there was a comment about being careful to avoid the hype of every drover and his dog. Do the research, then do the maths, finally, buy a stock that has substance and has solid value with a history of solid growth. Pretty simple really, and they were right.

Now we are in similar times. Lots of hype out there, in newspapers, TV shows etc. Everybody and their cattle dog is into buying property. BUT most do NOT do the research. It isn't rocket science!

I have seen properties bought recently in very wrong locations and 'done up' , probably spending close to $100K, and now they are sitting there, for sale, with a hefty price tag that only morons would pay. I guess if you can wait long enough, that moron will appear.

Very tragic.

 

[nads]

We live in a society where if we want something, we want it then and there without worrying about the consequences.

 

[Kevin]

unfortunately not every one has the desire to own property like we do.
If it was easy every one would do it.

I know i have gained so much from these forums, I hate to think of the mistakes I would have made with out this info

 

[nads]

Sure, not everyone is interested in owning property....but I wasnt interested either, until I found out it could one day make me a millionaire and help me retire young if I play my cards right.

But then again, we all make mistakes, and they are good learning exercises. I just hope I never make such an expensive mistake!

 

[willair]

All markets go up and down in the short term and the recent
price changes are but a reminder of this fundamental phenomenon.But the facts remain that in the long run property prices tend to rise ,reflecting economic growth,inflation and the scarcity of prime locations in relation to escalating poupulations,when we started in property many years ago
the interest rates where 17.50% just think about that for one second..will they ever go up to those levels again..wait and see.
good luck
willair..

 

[Kevin]

Mistakes are only bad if we dont learn from them, This how we learn.

Sorry don't mean to be philosophical.

 

[Desto]

Kevin, true, learning always costs. Whether you do spend it on books or you spend it by going headfirst and thinking about the consequences later. Either way, all learning has a fee. The important point, is to learn from these lessons.

Willair,

As someone said, in property, time will heal most mistakes. In the end its probably better to take the plunge, learn from it, than never to plunge at all

 

[Olly]

Here's another sad story -

My daughters friend who earns between 50-60k/year decided she wanted to buy a 1 bed unit around Burwood/Strathfield and finds one. She's single and a party animal and this was going to be a forced savings for her as it will be her PPOR. I at least made her look at some property sites to check other sale prices and current property prices in the area. She goes to auction. She's the highest bidder at $205k.
Haggle haggle - she ups it to $210 and says that's my final offer.
Haggle haggle and her sister steps in to help who "knows" more than her - offers $220 and says that's my final offer.
Agent says another person wants it and will pay more, (not getting into whether the agent was lying or not). She asks me What will I do?

I say things like - What's it really worth to you? and What's it really worth on the market compared to other similar properties? Is the agent bluffing to get you to pay more? Why wasn't this other buyer at the auction if he wanted the property? If it's not a bluff and you call it and you lose the property will you be devastated? I can't make your decision for you, just try to make you think. Haggle haggle.

End of the day she paid $258K and now she's scrambling around looking for the extra costs the extra price incurred.

While I don't have a crystal ball, I'm pretty sure this would have been one of the glut of units on the market that was hard to offload waiting for a moron (the word used in this thread).

There was another thread recently about people paying too much at auction and whether to clap at the end at their success in winning(?)/getting what they wanted etc

I don't believe you should make people feel stupid if you have the opportunity not to, so when she says "I paid too much didn't I"? I'll just say "Are you happy that you've got it"? and when she says "Yes", (even if it's hesitantly), I'll just say "Well as long as you're happy and you learnt something from it." And try to think of something positive to say like "the money you save in petrol over the years driving to work will pay for the extra $$'s you paid". Better that than going home to her new home every night feeling like a sucker.

Any of us could make mistakes (and have) if not for this wonderful forum and the advice we gain from it, or the referrals to books, seminars, get togethers, professionals and other info gathering things that are recommended here.

Cheers
Olly

 

[nads]

Good post Olly,

Totally agree with you, will take some of your advice on board when I meet with our friends tomorrow afternoon.