#261: Recovering from Buying a Lemon - How to Revive Your Property Journey, Stage of Life Considerations & Market Cycle Management

The Property Trio

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Dave opens our episode with a cautionary tale. We are grateful to our listener, Daniela who wrote to us about a challenging experience she and her husband had with a purchase she described as a "lemon."
After having bought a house and land package in Perth that delivered underwhelming capital growth performance for nine years, Daniela and her husband chose to sell the asset when moving to Melbourne for work. Sadly their timing wasn't great and they feel they missed the full cycle (home, upgrade, downsize). Now they find themselves with $110,000 in savings, a limited array of property options that appeal to them, a student son living with them, and a dilemma on their hands.
Do they buy a house in the outer suburbs or consider apartments? And if they can afford two apartments instead of a house, will this help them gain a better financial position?
Mike and Cate tackle the houses vs apartment outperformance question. Cate steps back to the heart of the listener question and suggests that finding a suitable home should be the primary focus at this stage, (as opposed to their appetite for capital growth outperformance).
Four unfortunate headwinds have compounded the issue for the couple now, namely;

• Their timing with the Perth market was unfortunate
• Markets are cyclical and managing market cycle risk is always a challenge when buy and hold timeframes are short
• House and land packages are notorious for underperformance due to the lower Land to Asset Ratio
• Melbourne's broad property value is still greater than Perth

"Over the previous ten years, Melbourne prices grew 96 percent, yet Perth prices in the same timeframe only delivered eight percent."
From managing simultaneous sales/purchases to strategising a surprise interstate move, Dave touches on some of the important elements for buyers to consider. Daniela and her husband sold the house in Perth, but could have they had a better long term outlook if they'd held onto Perth? And should they be buying in Melbourne now that they have moved there? There are a lot of questions that the Trio bring up for our listener couple to think about.
Daniela has nominated two options that she feels could be feasible, but why does Cate suggest that she could be on the wrong track? And what other options could be viable? Tune in to find out...
Stage of life is very important when it comes to determining a property plan. The Trio discuss the next items for Daniela and her husband to canvas in relation to their strategy.
"If they are focusing on Melbourne as their forever place, there is a silver lining. The market has stood still for them", says Cate.
.... and our gold nuggets!

Mike Mortlock's gold nugget: "Avoid perverting the course of what you are trying to achieve with dual ambitions." Having a clear strategy on a primary requirement can mitigate this risk.
Cate Bakos's gold nugget: Only once you trigger a sale event is when a result is crystallised. Cate recommends buyers seek professional advice before triggering a loss or a gain.
Shownotes: https://www.propertytrio.com.au/2024/06/10/recovering-from-buying-a-lemon/