Manage episode 302351402 series 1537109
Are you just starting out in property investment?
What fee will you choose to pay?
You’re probably hoping for none.
In today’s show, we’re going to talk about learning fees that you could end up paying as a property investor.
While some are obvious and paid-up front, it can quite often be the less obvious fees how much they may cost you over the life of your investment.
And if you’re not looking for them, some of those fees may appear not to have a cost at all – at least not one that you discover until later. So it’s important to know how to look for them.
Let’s take a look at two fees you should avoid and one that you shouldn’t
1. The Built-In Fee
Beware the shiny brochures, champagne launches, rental guarantees, slick sales offices, and other false prophecies.
You are paying a fee for all of this, on top of the kickbacks and commissions for all and sundry. It is all built into the purchase price.
On a $1 million purchase, that means you could be giving the developer anywhere from $50,000 - $200,000 and that should be your money- not his.
2. Opportunity Cost
It can be difficult to admit that we got it wrong and easier to hold onto an asset in the hope its time will come... someday!
Pride, ego, and emotion can get in the way of making a logical and rational decision.
Just 1% or 2% growth better growth per annum may sound like an insignificant amount, but just look at the difference it makes over decades.
The results can be gobsmacking, with the learning fee running well into the hundreds of thousands of dollars, even millions in some cases.
3. Up-Front Fee
Then there is the up-front fee.
The concept being that you pay someone a learning fee before you just jump in.
You pay them to ensure you get efficient and effective results, in the shortest possible time frame.
Your independent strategist can assess your situation and provide a solution and as a result, they are paid to help you arrive at the outcome.
You’ll find the most expensive advice you get is free, and the best value advice you’ll get will cost but stop you from making the mistakes the average investor makes – and this is worth a fortune.
6 More Learning Fees You Don’t Want To Pay as a Property Investor.
- 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 year 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 more when you take into account lost opportunity costs.
- The “capital non-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 – it may not seem like a lot, but adds up to more than you think.
- 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 property blogs would suggest.
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.
- 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 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 1.3 percent 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.
- 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 is and offer well below an acceptable price.
- 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 real estate agents who are highly trained negotiators who are taught how to get the top dollar for their clients – the seller.
So what should a property investor or home buyer do?
Rather than pay a learning fee to the market, why not pay a buyers’ agent to act on your behalf during your property investment journey?
Get a range of my ebooks here: www.PodcastBonus.com.au
Shownotes plus more here: Warning Property investors must avoid these learning fees at all costs
Some of our favourite quotes from the show:
“Despite the alarming statistics highlighting how badly the majority of investors get it wrong, many investors still just want to go it alone.” – Michael Yardney
“There’s definitely locations and certain properties that so far this year, despite the strong growth, haven’t been growing much at all.” – Michael Yardney
“Positive thinking breeds rich habits.” – Michael Yardney
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