Off The Plan + Home & Land Package Mistake!
I guess this has come up a bit lately because we’ve been talking about accessing equity in your family home to create a money tree – which we will be covering on one of our live webinars. A really common thing that happens is someone might decide that they want to improve their financial position and decide they want to do it through property.
They know that property is an effective way of building wealth. So they go out and start attending a whole lot of seminars. Then they find someone who has a really great, polished story and process. The one stop shop who looks after everything … you know the one I’m talking about. They source a property, help you a get your finance, arrange all the legal documents and promise you a treasure chest! It sounds easy and simple right?
What Actually Happens – The Broken Promise
Then you buy your property. Get it revalued and guess what?
It’s not worth what you paid for it and it’s costing you money every week.
So instead of getting a healthier bank balance, it’s becoming depleted.
I hear these stories a lot…
It’s very common and there are lots of people out there ready to take advantage of someone who’s feeling vulnerable. When you realise that you’re not financially set up for the future, you do feel vulnerable and a little bit anxious.
And so they prey on this “running out of time” mentality.
The problem with this type of “business” is they usually sell you either a house and land package, or something off the plan. For what reason? They have massive commissions for every property they sell.
If you just search or Google it you’ll notice that a lot of them have 10% commission for every sale, some even have more. So on a really modest home, you could be spending $30k – $50k in commissions and not know it. You can be pretty well rest assured. It doesn’t matter what they say in terms of their 50 point research checklist. At the end of the day, the name of the game for them is to line their own pockets and it’s got nothing to do with your future.
It is negatively geared – that’s the second problem.
You would have been sold the story that the depreciation is so much better on negatively geared properties. The thing about depreciation is, it saves you some of the money you are losing. So it doesn’t actually make you money as such.
Negative gearing has its place. But you need to be very specific about the property and the reason you’re doing it. It’s not a strategy for someone who is in their 50s or 60s. That’s a strategy that may work for someone who’s in their 20s, 30s or maybe even 40s. But if you’re in your 50s or 60s, you want to stay clear of negative gearing and get into positive gearing.
I’m not saying that everyone who sells property off the plan or house and land packages is crooked. What I’m saying is, it’s very hard for them to be objective when there is such an enormous commission for them. I myself had a very close encounter in getting into a dire situation. I consider myself very savvy when it comes to property and even I was sucked into their promise! So that’s how polished these guys are.
What I want you to do if you find yourself in this position, is to go away from the situation. Get some independent advice on it. Go to someone and get them to review what you’re doing because often it can be slightly pressured – so you’re in a room needing to sign there and then and it’s not the best thing to do. Get some space between you and the deal so that you can get independent advice and make sure that it’s going to push you forward rather than pull you back.
I hope that’s helpful…
You just need to remember everyone makes mistakes and you’ve got to forgive yourself for that and move on.
I look forward to chatting with you next week where I’ll be sharing another little nugget of gold with you.
