[Podcast] 6 Investment learning fees you don’t want to pay; Important Urban Trends moving forward with Simon Kuestenmacher

We’ve worked our way through the recession, the property markets are moving on, and more Australians are looking at getting into property.

So today, I want to share three segments with you that will help make you more successful.

First, I’m going to talk about 6 learning fees I don’t want you to pay.

These are costs that investors and homebuyers have paid to the market, or marketers, or spruikers, and if you can avoid paying them, there will be more money in your pocket.

Next, I’m going to have a chat about some new urban trends with a leading demographer, Simon Kuestenmacher.

We’re going to talk about how the pandemic has forced all of us to reevaluate how we live, and what that means for you for your own lifestyle, but also as a property investor and a business owner.

Then finally, in my mindset message, I’m going to talk to you about what I believe success is – and what it isn’t

6 Learning Fees

Here are 6 “learning fees” I’ve seen investors pay:

1. The “Oops, I bought the wrong property “learning fee”

Did you know that statistics show 20% of investors sell up their property in the first 2 years and 50% in the first 5 years?

So, you decide to sell within the first year or two and regardless of what price you sell the property for, you need to remember the huge costs associated with buying and selling real estate.

There’s the stamp duty when you bought it (plus the stamp duty for the new place), legal fees when buying and selling, selling agent commissions and marketing costs and, of course, the cost of moving twice in quick succession.

This means your learning fee is likely to be tens of thousands of dollars and potentially into six figures when you take into account lost opportunity costs.

2. The “no capital growth” learning fee

 This is the fee that you pay when you buy an investment with poor capital growth because it’s in the wrong city, suburb, or street.

Perhaps it grows at 2 or 3 percent per annum when buying the right property may have achieved 6 or 7 percent capital growth.

A three-percentage point difference might not seem like a lot but over the years this could add up to a learning fee easily in the hundreds of thousands of dollars.

3. The “renovation reality” learning fee

This is the learning fee that you must pay when you realize that renovations are hard work and not as easy as the reality TV shows or the property blogs would suggest.

Perhaps you bought a property that needs a significant renovation in the order of 10 percent of its purchase price.

But then everything ended up costing more than you expected, and the project ran over time, which increased your holding costs substantially.

This learning fee could easily cost you tens and tens of thousands of dollars as well as a waiting period of many years as you wait for the market to improve enough to get your money back.

4. The “I got eaten by a shark” learning fee

Here we have Sam and Susan, a couple of 25-year-olds who charge off to one of those investment property seminars that promise you’ll make a million dollars in six months.

Instead, our bright young things end up knee-deep in cash flow tables, bank documents and (oh dear) a signed investment home contract that results in their off-the-plan, out of town, so-called whiz-bang investment property growing at a miserable 1 percent or so per annum over the next 10 years.

The learning fee in this scenario is especially scary as that “shark advice” could end up being a millstone around their necks for many years.

5. The “buying with emotion” learning fee

 You can end up paying this fee in 2 ways.

Firstly, when you fall in love with a property and overpay.

Now while this may be allowed when you buy your home, it’s a big mistake for property investors.

The second way you pay this fee is when you miss out on an opportunity because you have an unrealistic expectation of what the property’s price actually is and offer well below an acceptable price.

You then get angry that the vendors are being “greedy” and storm off, not prepared to negotiate at all.

This learning fee here is about your own ignorance and not remaining objective and basing your negotiations on cold hard facts such as recent comparable sales.

6. The “negotiation” learning fee

 This is the extra cost to you when you are too afraid or too inexperienced to negotiate on price.

Many property purchasers are “shark bait” to selling agents who are highly trained negotiators who are taught how to get the top dollar for their clients – the seller.

Some highlights from my conversation about urban trends with Simon Kuestenmacher

• Now that we live in a pandemic world with less travel, we’re seeking more entertainment within walking distance.
• We have a large share of young people living in apartments, that spend time outside of the home because apartments aren’t ideal for socializing and exercise
  • That’s going to shift in the next ten years as those young people grow older and move to houses. They’ll be looking for neighborhoods that allow them the same amenities within walking distance in their new suburban destinations.
• The features of the 20-minute neighborhood
• Destination locations will be more in demand
• The move toward regional Australia may happen, but it’s important to understand who will be moving
  • Young singles are better off in a large city
  • But young families who have more mobile jobs are more likely to move to regional areas
  • Larger homes with 3 or 4 bedrooms will be more in demand

Links and Resources:

Michael Yardney
As our markets move forward why not get the team at Metropole to build you a personalized Strategic Property Plan – this will help both beginning and experienced investors.

Simon Kuestenmacher - Director of Research at The Demographics Group

Some of our favourite quotes from the show:

“The “I got eaten by a shark” learning fee keeps lots of people out of the market. In other words, they never get past their first investment property.” – Michael Yardney

“The homes we’re living in today aren’t designed to do a lot of entertaining.” – Michael Yardney

“Neighborhood’s always been important, but it’s probably going to be more important moving forward.” –Michael Yardney

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