Dave, Cate and Pete’s biggest regrets on their property journey (Ep.62)

In this week’s episode of the Property Planner, Buyer and Professor Podcast, the team intimately share with you some of the most significant mistakes that they have made along their property journeys, and their lessons learnt.

In this episode David Johnston, Cate Bakos and Peter Koulizos discuss:

  1. Selling propertiesthey could have held. The Planner, Buyer and Professor have all made this mistake at some point on their journey, along with many other Australians. Selling a property that you could have kept, is one of the most common regrets we see. 
  2. Not having a mortgage strategy in place. Your mortgage strategy allows you to use equity, optimise your tax deductions and plan for holding property into the future as you accumulate more properties in your portfolio. It is critical to help you avoid the first mistake of selling properties that you could have held.
  3. Keeping track of your Money Management! The way you manage your money is critical to success and ensuring that you have an effective money management system in place will not only give you peace at night, but will allow you to build your cash reserves to take the next step in your property journey.
  4. Not knowing what makes a good investment. The allure of shiny and new can be tempting, but beware! Not all that glitters is gold.
  5. Listening to the wrong people. Whilst your friends and family are well meaning and have your best interests at heart, they are most likely not property experts, (unless you are lucky to have a dad like Pete’s who worked in real estate). Ensure that you surround yourself with (and get advice from) independent experts.
  6. Buying a ‘bargain’. We all love a good bargain, but when it comes to property, looks can be deceiving. Purchasing a bargain property can attract a poor quality of tenant and you need to ask yourself whether it’s worth the headache and trouble.
  7. Not purchasing when you could have. Your risk profile may preclude you from taking that critical step in your journey. Whilst most people regret selling a property, you can also regret not taking the risk of purchasing a property that would have performed well. As they say, hindsight is 20/20.
  8. And of course, our ‘gold nuggets’!

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Show notes

  • Listening to the wrong people – family and friends may be well meaning, but that doesn’t mean they’re experts on the property market. Got advice to make sure location and land did all the talking, found a house in Bentleigh for $150,000, but Cate took her dad’s advice to go for something more shiny and new. However, Cate’s dad is not a seasoned property investor, but he is a great dad. The house in Bentleigh would have been worth $1,500,000 (8% capital growth over 30 years). Where as the unit Cate purchased instead would be worth $800,000 (5.8% growth over 30 years).  
  • Didn’t know what made a good investment – mistake no#1 for David – shiny new properties make good investments, but fortunately I couldn’t buy a shiny new one, so I had to search for a daggy old one.  
  • Selling too early – purchased a two-bedroom unit in Kew East, a good quality investment: one of 6 units, car park on title, tram stop and 500m walk to the shopping village. But the Property Planner sold it, as he hadn’t figured out what a good mortgage strategy was and ended up paying down a lot of debt. Purchased it for $176,500 – sold it four years later for $293,500 (at 13% capital growth over those 4 years) – if kept until today it would be worth $750,000 (growth of 7.5% over 20 years).  
  • The error here was not having the right mortgage strategy and selling that property and then doing it again! 
  • Purchased a townhouse in Kew next: 3 bedrooms, double lock up, no train access, but Kew is a great leafy eastern suburb in Melbourne, you need to be able to drive to work, it takes longer on the tram. Purchased the townhouse for $308,000 and it would now be worth low $1M (over 17 years that’s 7.5% capital growth).
  • By retirement those two decisions will have cost the Property Planner $2.5M. 
  • Not understanding mortgage strategy 
  • Didn’t use equity to purchase the second property, saved the old-fashioned way, did not use equity against Kew East unit. We only borrowed 80% because we wanted to save mortgage insurance. We could have used equity and optimised tax deductions further and made more of a case to keep it as well.  
  • Pete’s mistakes – selling when he could have kept 
  • 392 Anzac Highway Camden Park – 6 units, we bought them in 1998 for $274,000 and then we could see that coming out of the recession in 90’s the market was pumping in early 2000 and there were lots of first home owner grants. We’re going to have longer vacancy rates because good tenants will be moving out to purchase their own properties, so I recommend that we sell. Sold them off individually – in total just over $500,000, but today each one of those units is worth $274,000. Each unit would rent out at around $300 a week x 6 units $1,800 a week – mortgage repayment was $10,000 a year and annual rent was $90,000 
  • 3 St John’s Road Glenelg – block of 13 units, bought the block for $480,000 in 1999, And thought it was a great suburb with great people. After managing ourselves for a few months, we painted them and sold them 6 months later for $550,000. It sold in 2014 for $1.6M today it’s probably worth $2M. Mistakes that I’ve made it not holding onto the property that I should have.  
  • The common theme – selling property that you could have held if you understood mortgage strategy. Cate – I didn’t understand mortgage strategy. From signing contract to taking the keys, it was $150,000 unit and had an opportunity to sell it straight away – which I sold for over $200,000 – by that time I was priced out of Bentleigh. I wanted the lowest possible mortgage I could muster because I was still finding my feet, and set my price limit for house on a block near the beach. Found a house in Seaford and it could have been a multi-site subdivision block of land, rugged old house. It was a project home of the worst that needed to be done up, thought I had to sell the property to grab the gain, instead of taking out equity and that property would have been worth well over $1M now.  
  • Selling property you otherwise could have held if you understood mortgage strategy and how to access equity, preserve tax deductions and plan for future accumulation of property.  
  • Money Management – thanks to my parents I’m pretty good with money management and have been for most of my life. Mum and dad would give us some pocket money each month: 25% had to go into the bank which we couldn’t touch till we were 18 and the other we had to ration for ourselves – pay for sporting clothes and gear. We had to learn timing when you spent your money, taught me a lot of lessons for independence with money and putting it aside.  
  • Moved to Melbourne from Gippsland and house sharing with a mate, got first full time job, kept saving – and then I thought this is pretty good, I can just spend. I started spending everything that I was earning when I was 22 or 23 and other periods in my life where I lost track of my spending habits for 6 or 9 months. Just after we had our first child we lost track of this a bit. The sooner you set up a money management system the better and stick to it, because you don’t need to spend as much time thinking about it, it becomes habit. If you can get it in place before you have kids and a mortgage, and where you have a partner that has different spending habits, it will save you a lot of money, time and heart ache if you have a partner whose spending habits are different if you value different things.  
  • Purchasing a bargain – I had an opportunity to buy something that I spotted on the internet – not all bargains are good bargains. I fell prey to that issue and thought I would do a subdivision without having to build. Purchase a block of units on one title, and then go through land surveying and titles office, then that triggers changes to dwellings (fire exits). I found four units in Morwell, and I paid $180,000 for them. The rents looked good on paper – $65 per week per unit, I didn’t realise the council was happy to consider it a fully subdivided set of units and we got four sets of land tax – there was a correlation between socio economic and character of tenant. Police were involved in fights and domestics – my husband said to me I’m done with these, just get them sold. I sold them for $280,000 so there was a gain, but for the stress and effort it was just not worth it.  
  • Listening to the experts – Pete should have listened to his dad who was in real estate – first teaching job was out in the country and there was not much choice for property for rental. Bought a place when I was 24 – if I had listened to dad and bought early on, I would have benefited from another up in the property market. You need to listen to people that know property and will give you independent advice.  
  • Not taking risks – Taken a bit more risk I could have purchases east Melbourne $750,000 terrace now probably $3M and Hawthorn $1.3M that would now be worth $4-5M. Taken the risk I would have found a way to hold onto them.  

David Johnston- The Property Planner’s Golden nugget:  mistakes are a part of life and if we make mistakes we should embrace them and they provide the greatest learning opportunities in life. We don’t want them to be too big of a mistake, but each mistake is one step closer towards success if we take the time to learn what we can from it.  

Cate Bakos – The Property Buyer’s Golden nugget: making mistakes is a right of passage, we all make mistakes, but the critical message is don’t make a big mistake. If you feel that you have made a mistake and want to reverse it, talk to someone if it’s potentially an irreversible decision or will get you in a bit of strife if you got it wrong.  

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