Recovering from Buying a Lemon – How to Revive Your Property Journey, Stage of Life Considerations & Market Cycle Management (Ep. 261)

Dave opens our episode with a cautionary tale. We are grateful to our listener, Daniela who wrote to us about a challenging experience she and her husband had with a property purchase.

Daniela’s question:

We bought a “lemon” in Perth as first home buyers (house & land ) and suffered with it for 9 years . Husband was transferred to Melbourne and we sold our family home & moved to Melbourne. We would like to buy our home in Melbourne but the areas we like are quite prohibitive and we are renting at the moment.   

We live in an apartment building at the moment and although it is stylish, we do not have enough space (we downsized from a family home) not to mention the parking challenges (we have 2 cars and only one allocated parking spot). 

The only properties we can afford should be within 700,000-800,000 range which pushes us to Mernda/Doreen if we want a house or we can buy two apartments, one for us one for our son and rent out his until he is ready.  

We are in our ’50s and we feel we missed the full cycle (first home -small, upgrade as kids grow, downsize when kids go to Uni/get married). We shall be empty nesters in 5-7 years.   

We have only $110,000 in savings. 

What’s worth having? Two apartments or one family home with the hope one day it will increase in value so we can use the equity to buy some investments properties (apartments in CBD)?   

What should we look for, first?

Mike and Cate tackle the houses vs apartment outperformance question. Cate steps back to the heart of the listener question and suggests that finding a suitable home should be the primary focus at this stage, (as opposed to their appetite for capital growth outperformance).

Four unfortunate headwinds have compounded the issue for the couple now, namely;

• their timing with the Perth market was unfortunate
• markets are cyclical and managing market cycle risk is always a challenge when buy and hold timeframes are short
• house and land packages are notorious for underperformance due to the lower Land to Asset Ratio
• Melbourne’s broad property value is still greater than Perth

Dave highlights – “Over the previous ten years, Melbourne prices grew 96 percent, yet Perth prices in the same timeframe only delivered eight percent.”

From managing simultaneous sales/purchases to strategising a surprise interstate move, Dave touches on some of the important elements for buyers to consider.

Daniela and her husband sold the house in Perth, but could have they had a better long-term outlook if they’d held onto Perth? And should they be buying in Melbourne now that they have moved there? There are a lot of questions that the Trio bring up for our listener couple to think about.

Daniela has nominated two options that she feels could be feasible, but why does Cate suggest that she could be on the wrong track? And what other options could be viable? Tune in to find out…

Stage of life is very important when it comes to determining a property plan. The Trio discuss the next items for Daniela and her husband to canvas in relation to their strategy.

“If they are focusing on Melbourne as their forever place, there is a silver lining. The market has stood still for them”, says Cate.

Gold Nuggets:

Mike Mortlock’s gold nugget: “Avoid perverting the course of what you are trying to achieve with dual ambitions.” Having a clear strategy on a primary requirement can mitigate this risk.

Cate Bakos’s gold nugget: Only once you trigger a sale event is when a result is crystallised. Cate recommends buyers seek professional advice before triggering a loss or a gain.