Each time you make a property decision, people need to be paid – and out of your own pocket no less! Having to sell multiple properties throughout your lifetime can quickly see your resources depleted. Property buying is not a cheap game to play. Domain recently featured an article about a family who sold their home and bought it back years later because they regretted making that move.
We have heard other stories of people putting off buying a home, only to purchase the same home when it came up for sale four or five years later for an extra $700,000.
To give you an idea of the costs of buying and selling, below is an example based on the family in the Domain story, but assuming that each sale and purchase was for $700,000 which is unlikely, but we will be conservative and assume the value of the properties did not increase during the process.
- Buying your home for the first time in Victoria: Stamp duty and other government costs on the initial purchase of $40,000 and $1,500 solicitor fee
- Selling your home first time: real estate agent fee at 2% = $14,000 and $1,500 solicitor fee
- Purchasing the new home in Victoria: Stamp duty and other government costs on the purchase of $40,000 and $1,500 solicitor fee
- Selling your new home once realising you made a bad decision: real estate agent fee at 2% = $14,000 and $1,500 solicitor fee
- Purchasing your old home back: Stamp duty and other government costs of $40,000 and $1,500 solicitor fee
- This scenario also includes three sets of bank set-up and exit fees plus land titles office fees – approx. $3,000
- Also the costs involved in moving and associated expenses – $10,000
That is a whopping $168,500 over a period of a few years poured down the drain!
What have we not included in this calculation? The value of your time in organising a purchase/sale and also the level of stress incurred in this process.
So why do people make more property decisions that is required?
This can be for many reasons such as:
- The ill-conceived belief pushed by the media that you need to accumulate as many properties as possible to ‘win’ in the property and financial game.
- Making decisions hastily in the vein attempt to get rich quickly through property
- Not having a long-term plan and making short-term decisions that then need to be unwound later on
The truth is that you only need 2 to 5 properties to retire significantly wealthier than the average Australian if you have chosen quality property, held them for some time and reduced the associated debt. ‘It’s Not About How Many Properties You Own’.
Although thinking about the future may be scary at times, it is important to envision where you see yourself in the long term, so that you can make good decisions that won’t cause road blocks down the track.
Read the Domain article that inspired us to write this story.
All the best with your Property Planning!