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Hi All,
My frustration has led me to posting my thoughts here.
2 couples that are friends of mine were presented with the same situation and both took the same action - much to my distress.
The situation being:
They want change in their lives so they think moving from their home is the answer. They approach an RE Agent for a valuation on their respective properties and of course they are told their houses are worth way more then they had anticipated. Fuelled by the great news they list with that RE Agent.
"Why are they selling their house?" I ask them. (These couples do not know each other). The answer: "Well we didn't know our house was worth so much so we have decided to sell, get the $$, rent for a while or start looking for another house to buy".
None of this makes sense to me! I ask them "have you thought of renting your house out and moving somewhere else either renting or buying another house?" Their answer - "no we haven't thought about that. Now that you mention it though - we couldn't afford to keep this house and get another one".
I explain to them how it can work - you know...leverage of the equity in your current house to get a deposit for another house. Plus with the minimal mortgage on your existing house the increase you are borrowing will easierly be covered by the rental payments etc.
In theory they get it. I also explain how property keeps going up in value so when they eventually buy another property they will have 2 properties with growing equity. They say they understand that too.
So why didn't they do it? One couple sold their home and bought a house one street away. They pass their old home every day when they go to work. The owners of their old home are first time buyers like they were.
The 2nd couple's situation is more frustrating for me - though. When I was explaining how it could work - renting their property out and then renting themselves until they find another property etc I told them I thought their property would rent for $350 per week.
They of course didn't believe me - so I said "go and get a rental appraisal". They didn't. They have sold their property to investors who said they can rent it for $350 per week. They can not afford $350 per week and are now renting somewhere else.
Their mortgage was approx $175K and they could have got $350 per week rent. Their property was beach front and growing steadily in capital growth. Basically it was costing them approx $235 in mortgage payments per week + rates.
Even more frustrating is the fact that they only got approx $80K profit from the sale. I know they are now renting - paying $310 per week.
In working through why I thought both couples chose to sell their property rather than keep it I realised that the driver for them was - the short term gain a few $$ now - to hell with the future.
So what drives a lot of people IMHO is - preventing boredom and short term gain. With these 2 couples they were getting bored so thought they might as well move house. Then when faced with a couple of financial options both couples elected the immediate pay-back taking a few $$ in equity now over lots of $$ in equity later on.
Cheers,
Donna
My frustration has led me to posting my thoughts here.
2 couples that are friends of mine were presented with the same situation and both took the same action - much to my distress.
The situation being:
They want change in their lives so they think moving from their home is the answer. They approach an RE Agent for a valuation on their respective properties and of course they are told their houses are worth way more then they had anticipated. Fuelled by the great news they list with that RE Agent.
"Why are they selling their house?" I ask them. (These couples do not know each other). The answer: "Well we didn't know our house was worth so much so we have decided to sell, get the $$, rent for a while or start looking for another house to buy".
None of this makes sense to me! I ask them "have you thought of renting your house out and moving somewhere else either renting or buying another house?" Their answer - "no we haven't thought about that. Now that you mention it though - we couldn't afford to keep this house and get another one".
I explain to them how it can work - you know...leverage of the equity in your current house to get a deposit for another house. Plus with the minimal mortgage on your existing house the increase you are borrowing will easierly be covered by the rental payments etc.
In theory they get it. I also explain how property keeps going up in value so when they eventually buy another property they will have 2 properties with growing equity. They say they understand that too.
So why didn't they do it? One couple sold their home and bought a house one street away. They pass their old home every day when they go to work. The owners of their old home are first time buyers like they were.
The 2nd couple's situation is more frustrating for me - though. When I was explaining how it could work - renting their property out and then renting themselves until they find another property etc I told them I thought their property would rent for $350 per week.
They of course didn't believe me - so I said "go and get a rental appraisal". They didn't. They have sold their property to investors who said they can rent it for $350 per week. They can not afford $350 per week and are now renting somewhere else.
Their mortgage was approx $175K and they could have got $350 per week rent. Their property was beach front and growing steadily in capital growth. Basically it was costing them approx $235 in mortgage payments per week + rates.
Even more frustrating is the fact that they only got approx $80K profit from the sale. I know they are now renting - paying $310 per week.
In working through why I thought both couples chose to sell their property rather than keep it I realised that the driver for them was - the short term gain a few $$ now - to hell with the future.
So what drives a lot of people IMHO is - preventing boredom and short term gain. With these 2 couples they were getting bored so thought they might as well move house. Then when faced with a couple of financial options both couples elected the immediate pay-back taking a few $$ in equity now over lots of $$ in equity later on.
Cheers,
Donna
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