Needing to sell property too soon – No. 7 of the top 7 Critical Mistakes (Ep.37)

Did you know that purchasing three homes and selling your first two over your property journey can equate to a financial loss of 10% of your lifetime earnings? 

You work too hard to throw away that kind of money! 

In episode 37, we discuss “Needing to sell property too soon” – No. 7 of the top 7 Critical Mistakes.    

Listen as David Johnston, Cate Bakos and Peter Koulizos take you through the causes that trigger a premature decision to sell, how you can maximise your ability to hold property and how selling properties can impact your bottom line during the ‘flexibility stage of life’. 

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Show notes

  • The most common regret – selling a property too soon. What causes people to sell property when they could have held? 
  • Short-sighted purchases – buying a property which only suits your needs for the next couple of years or an investment property that you need to offload to get into your future home. We see this most often when people make purchases before starting a family then realise that lifestyle for their loved ones is number 1 priority. It is recommended to hold property for 7 to 10 years to ride out market cycles, get ahead of the cost to buy and cost to sell. If you are rentvesting and haven’t factored in your future plans for owning your home, you should talk to a professional. Now.  
  • Getting caught in the moment – whatever pressures you’re going through could last a month or 12 months or more. In the scheme of your life, it’s relatively short. But in the thick of it, you may not be able to see through it. You may be starting a family and think your mortgage is too much to handle on one income. But there are tools to enable you to get through this period, like your mortgage strategy! 
  • Tenants from hell – don’t sell a good property because you have bad tenants. If you have tenants that do malicious and willful damage to the property, it may make you feel negative about it. Think deeply about whether the property or location is attracting bad tenants, or whether it’s actually just some bad luck. You can also offload your property manager if they’re giving you grief (but check your contract first – it differs from state to state) 
  • No mortgage strategy – get advice from an independent advisor and nut out the cash flow implications, be aware of all the ways you can enhance your ability to hold property before you make a decision to sell. What are some of the ways you can make it through a financial downturn: paying the minimum principle and interest repayments, changing to interest only, extending out the loan term, taking out extra equity to keep as a buffer. The only reason you should sell a proeprty is that you cannot hold it from a cash flow perspective.  
  • Consider the opportunity cost – are you hurting yourself by not selling? More often than not, it’s not worth selling a property unless it is truly a lemon and not positively geared. Your borrowing capacity may not be improved by selling.  
  • Lack of forward planning – you’ve bought a home that you think will be your long term home, then something changes.  Women have good instinct on what will make a good home for family, have good conversations with your partner if you’re in a relationship and get on the same page. What are your children’s needs when they are 7 and then 17? You can stretch yourself more today to avoid needing to upgrade in the future. Or buy land that allows extension out or up.  
  • The flip side – don’t get caught over-emphasising where you want to be 15 years away. There could be significant lifestyle costs to buy the mcmansion, particularly where it is in a poor location and kids are 10 years away.  
  • Media noise – external influences like market sentiment and headlines can spur you to make poor decisions.  You need to go and seek independent advice before you pull the trigger on a sale, make sure your decision is objective.  Property doomsayers are rarely, if ever, right and if you ride out the storm and hold for long enough, the market will come good again. The big debate – Dr Stephen Keen and Christopher Joye – look this up for a great example of how external influences are rarely a good reason to make property decisions. Always take mass media with a grain of salt.  
  • The results are in! The costs of unnecessarily selling property are eating up your wealth. Let’s assume you purchase 3 homes over your life time – that is: 
    • 3 sets of stamp duty – $120,000 
    • 2 sets of selling cost – $30,000 
    • 3 sets of bank set up – $3,000 
    • 3 sets of legal fees – $5,000 
    • Moving 3 times and associated costs- $10,000 
    • What value do you put on your time to organise selling a property and searching for another one? 
    • What value do you put on the mental toll – level of stress, frustration and anguish experienced throughout this process? 
    • The total can come to $200,000 to $300,000. 
    • That is about 10% of your life time earnings – let that sink in for a moment.  

David Johnston- The Property Planner’s Golden nugget:  If you’re even thinking about selling property, see an expert and work out do you really need to sell, what ways could you hold the property and is it necessary, will it actually help you achieve your goals? 

Peter Koulizos– The Property Professor’s Golden nugget:  An oldie but a goodie. You need to plan a property purchase – fail to plan and you’re planning to fail.  

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