How much is too much?

The debate in the office at the moment has been stemmed from a comment in last Saturday’s paper talking about what people regret they didn’t do in their 20’s. The comment that sparked the debate was that a finance writer said they wish they bought a property or two in their 20’s and about buying the "right stuff”. This debate then continued on to the age old question of how much can you put yourself into debt without restricting or putting to much pressure on yourself financially?

It’s the same as parents wondering if they should purchase that investment property in Melbourne now for when their kids go to university or relocate there. The other plunge that people talk about is extending themselves to a bigger family home when their kids are younger and they can actually utilise this bigger home.

I’ve been researching into buying a property recently and I have had the same debate with my father. I believe and have always been told that Blue chip real estate is always more expensive but also the safer investment to see you gain capital growth which would mean extending myself a bit more at the age of 24. What would I have to give up to be able to do this? and looking at the worse case scenario – interest rate rise and a property without a tenant for a period of time it would put me under a lot more financial pressure then probably necessary as a 24yr old. We all have heard about the well known fact about 'buying right' but the trick is to be able to hold on to it for 10yrs. Banks never run through the worse case scenario with you and have insurance to cover them if you default on your payments and the residential market plummets.

My father’s argument is that is doesn’t matter how much you outlay as long as you are careful about where you buy, you should always see growth over a period of time. I understood his argument a little better recently when I came across two people selling a home in the same area. The perception of spending more to make more didn’t really ring true.

Family number 1. outlayed $240,000 for their home and Family number 2. outlayed $320,000 for their home. Both parties saw roughly a 25% increase on their investment over 4 years. Say for example these two families were both in the same financial situation putting $120,000 towards their loan – Family 1 would’ve paid around $37,000 in interest in 4 years, however family 2 would’ve paid $62,000 in interest. This means family number 1’s profit is $23,000 and family number 2’s profit is only $18,000. On top of that the monthly repayments for Family 1. were only around $800 a month in comparison to Family number 2. at $1300.00 giving family number 1. more of an opportunity to pay off principal. (I’ve calculated this estimate on the current interest rates – these figures aren’t true and correct - only a guide).

The one thing everyone agreed upon was that you should only do what’s comfortable for you. Whatever path you choose can steer you in completely different directions. To go even deeper you can even ask yourself what’s more important – life without financial pressure or money – setting yourself up for later on in life. Those family holiday’s with the kids or having a bigger home so your children have more independence. No answer is the right one as such. Life’s pleasures can be scaled back – but how much do you scale in before you start putting yourself under too much financial pressure.

At the end of all this it’s what you feel comfortable doing. It’s quite easy to sit back and say in your 30’s I wish I bought a property or two in my 20’s but make sure you look at the entire picture and look at what you would’ve given up also. Or if in your 30’s you are financially stable due to the purchase you made in your 20’s but wish you had of lived your life a little more when you were younger as you have other stresses now – eg: Job, Children. It’s a decision you can only make but think carefully before jumping into anything and once you decide don't look back.

Hitting your property for a six at Auction!

While the rest of the world were gearing up for Christmas & New Year – the graduation students of 2003 in Echuca were gearing up for a different kind of event.

It all started back when we were in Yr 12 at school & instead of studying & preparing for exams we were out and about & in most cases frequenting the Dock & the American (The Yank) & there it all began a community of young kids – a matter of fact the “Hot” Community! I still can’t quite pinpoint who the founder of this Hot Community was & where the name actually came from however if you were out at the Dock that year listening to Mick & Ollie play it was quite likely you were part of this Hot Community.

Once school finished and everyone went off in their own directions – the inaugural event the "Hotman Cup" was born. The “Event” that everyone would make an effort to come home to - to continue on the Hot Community spirit.

The Hotman Cup is an annual cricket match between Echuca High and St Joe’s. It isn’t your average cricket match and by no means is it anything like professional cricket. It’s more a game of stamina; last man standing type of game.

The word of the event is becoming more and more widespread with a list of over 60 people attending this year. The tradition has been carried on since 2004 & the event keeps growing every year. The beginning of the festivities starts Friday lunch time, this continues onto the Gala Dinner at the Dock (where it all started), presentation of the team members and then into the much anticipated cricket match on the Saturday. The celebration continues into the wee hours of Sunday Morning and then is usually followed up with a celebratory dinner for the winning team. I don’t know how much bigger this event can get…maybe a street parade next?

In thinking about this Cricket event I have noticed some similarities with Vendors Auctioning their home. The difference between hitting it for a six or going out for a duck…there are some rules that apply to creating a successful auction.

Play to your strengths. Any good cricketing side knows their strength: for the St Joe’s cricket team their strength isn’t so much in their cricketing skills more their drinking skills however they use this to their advantage by hurting the High School boys on Friday night so they are a little seedy going out to play on the Saturday. Pinpoint what it is that is going to make your home appealing to a range of buyers. Is it the location? Is it unique? Is it the price? Make sure you use this within your marketing.

Know your weaknesses - Be prepared for what the bowler is going to throw at the batsman. Buyers are very aware of other properties on the market & will compare your home to others, make sure it’s competitively priced otherwise comments from the buyers will be “I can buy the one around the corner for a lot less”, Or maybe your home isn’t very big - minimise furniture to avoid the comment “it’s too small” – know what it is that they will pick the eyes out of – see if you can try and rectify these issues before it hits the market. Try and eliminate as many strikes as possible as this is what they buyers look for. Get a pest inspection report before you hit the market so that is one less thing the buyer has to worry about.

Set a low reserve – this is a gamble as any game is – it’s like a batsman trying to make that extra run (with the possibility of being run out). If this is done at the start of the campaign the typical progression is that buyers should be everywhere which leads to a more competitive environment and gives you a situation where the buyers can become emotionally involved resulting in a higher price then expected.

If this doesn’t happen the worse case scenario is that your property is sold on the day for the price that you set the reserve at – SOLD is better then it sitting on the market for months and months and you eventually taking the reserve price you set or in many cases lower then the reserve.

If you follow these simple tactics you can hopefully be certain of a century, your property sold or even a St Joseph’s College Victory. Good luck to all Vendors auctioning their property & to the cricketers this Saturday.

Let’s bring home this Hotman cup boys! St Joseph’s 2010