Edition 2 James Market News Property Report - Flipbook - Page 4
Buying Insights
The Learning Fees
There are many learning fees the Do-It-Yourself buyer can end up paying.
Mal wrote this article 15 years ago and every word still rings true.
Capital Growth Gap DIY Learning Fee: A home with poor capital growth characteristics can compound financial problems.
he “Learning” Fee is the
amount you as a Do-It-Yourself
buyer can end up paying extra
for the home you buy, simply
because buying a house is
not something you do every day. We all
pay some form of learning fee every time
we buy. For the inexperienced it is an
‘unknown unknown’, for the more
experienced it is just a question
of amount.
As buyer agents at James Buy Sell,
each of us in the office have paid
significant learning fees buying
property in our personal lives. Let me
tell you how many mistakes I made in
my personal property life early on.
I’m in my 60s and have banged my
head against the wall enough times for
the message to sink in. And now each
time I buy personally and professionally,
my learning fees are lower.
Learning fees come in a number of
shapes and sizes. Here are just some
examples we have come across.
(To keep the maths simple, we’re
using $2 million scenarios).
T
1
Wrong Home
DIY Learning Fee
You buy a home, and after a year or
two it just doesn’t feel right. With the
“happy wife-happy life” jingle firmly in
your mind you sell and buy again. Your
financial Learning Fee, assuming you
bought and sold well in the first place,
is: $110,000 in stamp duties $60,000
in agent selling and reselling fees
$20,000 in removal costs and another
$20,000 in incidentals such as legals,
repainting etc. That’s around $210,000
in Learning Fees.
2
Capital Growth Gap
DIY Learning Fee
This is where you buy a home
with poor capital growth characteristics,
and it grows at the rate of say 5% while
everything around you grows at 8%.
A 3% difference mightn’t seem like
much short term, but over the
average seven years of home
ownership, your decision will add up
to a Learning Fee of $493,557
($3,173,748 – $2,680,191).
3
Missed Opportunity
DIY Learning Fee
This is the Learning Fee you
discover you’ve paid when you compare
yourself with Mr and Mrs Jones
who always seem to be on holidays,
sending their kids to great schools
and not working much. That’s because
they were prepared to pay an extra
$100,000 a few years ago after
beating off stiff competition from six
other bidders for a really good period
home with good land content.
Since then their home has been
outperforming the rest of the property
market at 8% a year. Meanwhile the
less than average property you
settled for has been growing at
just 5%. Even accounting for the
initial extra $100,000 the Jones’
spent, “overpaying” for their great
home, your Learning Fee for
buying your ordinary home is
around $1,000,000; over seven years
that’s around $200,000 per annum
for EACH of those seven years,
before tax.
