Going it alone in the property market? You’re better off solo climbing Mount Everest
The true story of one man’s costly mistake and how seeking expert help could have made all the difference.
Back in 2021, my mate, let’s call him Mark, asked me about buying property.
I own quite a few properties, I work in property, and I’m humble enough to realise I don’t know it all but let’s just say I know a bit.
I like my mate Mark so I tried to help him out.
Mark wants to buy an Investment Property. He lives in a regional coastal town and has seen property prices go up pretty consistently over the past few years. Like most people, he likes where he lives so he figures that other people will like it too and it should go up in value.
Mark has some media-driven worries about the property market crashing and like most, procrastinates on big decisions. In my experience, it’s not so much fight or flight when it comes to property, the biggest issue is freeze.
I love property, it’s done well for me, my family, and the many hundreds of clients I’ve helped, so I encouraged Mark and push him to invest.
I urged caution about investing in a regional area, property prices are driven by population growth and population growth happens in capital cities.
I encouraged him to invest in land as it’s the commodity that is going up when you buy a property. Apartments and townhouses simply do not have enough land content.
I encouraged him to build new for the tax breaks and cash flow benefits.
Above all else, I encouraged him not to go at it alone as he is new to the industry – there are hazards aplenty for the uninitiated.
The pep talk worked and Mark moved from freeze to action.
Unfortunately, he acted against my advice and purchased a house-and-land package in a regional area and built it through a builder mate of his.
Fast forward to 2023 and I reach out to Mark to find out how it all went.
This is where the story goes bad.
It turns out Mark didn’t sign a fixed-price contract with his builder.
The builder, his mate, sends him a price variation for $70,000 mid-build. Mark can’t afford it and tells his mate to go jump. He then shops around for a month to find a new one, finally signs a new contract, and as of January 2023, still hasn’t commenced construction.
That’s a long time to be paying interest on a block of land without an income.
Back in 2021, when I was giving Mark this advice, I had some clients, Peter and Rachel, who wanted to buy a home to live in Logan Reserve, where I was recommending that Mark buy. With a deposit of only $10k, they purchased a 460m2 block of land with a 210m2 house on it for $543,800. Their build was completed on budget in 23 weeks and was revalued in 2022 for $725,000. They used the equity from this home to purchase an Investment Property in Jimboomba which is due to be completed early this year.
Not bad for a $15,000 start.
They faced exactly the same market conditions as my friend Mark, the difference was they sort help from an experienced team to deliver their dream.
That’s why going at it alone into the property market just doesn’t work (most of the time) – it’s just full of risks that may get you to spend more than you bargained for.
