Mistake I made… hopefully you can learn from it

Hi all,

I’ve made mistakes, big ones and small ones, a few to mention…. but I’ll relate one to you. If I tell all of them, you’d never hear the end of it.

The Unit, bow. Yes, a unit at Hunters Hill. I mentioned this to you guys in one of the threads.

Backstory: One year after divorce and just recovering from my seeming bankruptcy, I decided to plunge back into the market. Bad. Bad. Bad. To go back into the market so soon was bad but that’s not the half of it.

Making emotional decisions is BAD. Newbies, don’t invest when you’re depressed or in recovery. DON’T. In hindsight, I was making myself feel better for my failure to hold on to my marriage. Losing three properties through divorce was hard so I looked to compensate it with another. It was also probably true that there was an element of pride in it, “Look what I got.” Silly. Stupid.

Hard truths to swallow but if I mince words, it would be like I never learned from it.

Anyway, in hindsight, it wasn’t just an emotional decision, it was also “mathematically” stupid.

Back then, I was working as a mortgage broker, supporting four kids. Although ex-husband does not provide financial support we have split custody and he really does look after them when they’re with him. God bless him. So, straight away, child support was, and still is, a non-event. This was mutual agreement though, not his fault.

Secondly, mortgage broking means one month you’re rich and the next you’re just about ready to Q at Centrelink. It didn’t get that bad but close.

Thirdly, the property was heamorraging money. Trust me, I’m not exaggerating. It was heamorraging $1,000 a month. The quarterly strata fees were so high that I was paying equal to 14 months repayment.

There was a saving grace though because I always found fantastic tenants. Being Hunters Hill, you only got the cream of society as tenants. One repainted my unit, 3 X coating. Three!!! He was obsessive with perfection. And, believe you me, he ripped up the carpet and laid floorboards. He called me from Ikea and said, “I’m out of here, these floorboards are disgusting.” Went away and bought the most expensive floating floor boards in the market. He said he’s used to a certain lifestyle and must meet that standard. I only paid for the labour.

Anyway, negatively geared it was. I learned the lesson that you can’t eat negative gearing or depreciation. And when the kids wants something besides the basic survival needs- (food, water, housing… thank God for public schools or my kids would have had to consider schooling optional to their survival) you just have to say, “NO.”

Every time I despaired, I’d go for a walk at Hunters Hill. It’s such a beautiful place. I’d come home feeling better but my kids and I can’t eat the views.

Enter panic mode again. But no! Don’t panic. Think. After investigating all options, I found that vendor financing was the ideal solution. In 2006, I went in that direction and found myself making $580 a month, from negative $1,000 pm. So for three years, I was making a little money, instead of bleeding to a slow death.

I’ve had to “sell” for 0 capital gains as GFC hit. So folks, this is the kicker — after the “buyer” bought “refinanced” last year via bank loan, the capital growth sky-rocketted. Soon after RBA dropped the interest rate, the unit went up $110,000.

If you can hold on to your property it will eventually make you money BUT this strategy only works if you have the means to hold on to it. Clearly, negative gearing is, in itself, NOT a strategy. It is a BONUS. Holding to an asset only works if there’s “meat on the bone.” In my case, there were just tendons.

I tell you what though, I have no regrets. It was bought from me by a young man who was almost like a son to me. Secondly, by letting go of it, I got to fight another day. Look where I am now. Still standing and carrying on.

So you see, long-term investors make mistakes, too.

Hope this has enlightened someone.

Angel