Bought a house – feeling like I made a mistake

Hi Suri

Firstly remember that you (i hope) have conditions of sale that offer you possible exits if needs be (eg finance, building & pest, due diligence).

Have you cut some numbers on what the house would be worth if resold on a smaller block of land? (ie if you put the yard on a separate title or titles?), and numbers on constructing additional dwellings in the backyard?

Hi Suri,
What Jacqui has suggested makes a lot of sense, and reminds me of a story Steve tells in relation to his mantra of making money. His aim when investing is to :-
make the most money
in the least time
with the lowest aggravation
and the least risk

Balancing those out on a particular deal he had, led him to do exactly what Jacqui suggested above. He had a block that could be developed, so he “ran the numbers” and found something like this (I don’t recall the actual figures but is an example):-
Developing and building one extra house was going to gain him just $20k in 9 months (erk!!)
Developing and building two extra houses was going to gain him around $120k in 10 months (not so bad)
Getting Development approval and onselling to a builder would gain him $100k in 6 months without having to actually build them himself. (He chose this path)

Though building two houses would have earned him more, he would have had to outlay far more to build two houses, so the return on investment was going to be way lower than spending just enough for a DA, and getting nearly the same return more quickly.

Way less aggravation and risk !! You may well be in that same situation – run your numbers, and see what they say.

Benny

PS By the way, I just found Steve’s actual numbers and the story (I didn’t have the facts right, as I suspected… wah!!) It is the story that opens Chapter16 of “0 – 130 Properties in 3.5 Years”. His third option actually paid him MORE money than the second option did. Oh, and there was way more to it too, so go find it if you have the book.

Oh, and the final learning from the story (as it all worked out to a $130k profit) was “How many deals like this would YOU have to do each year to replace your wage?”

• This reply was modified 9 years, 5 months ago by  Benny. Reason: Adding the book reference

I’m going to address the most concerning question here: whether or not your lender will finance this purchase. If not it becomes a matter of losing the deposit and possibly being sued.

For the moment, all energy should probably be put into determining how to finance this purchase if the bank says no. Then worry about everything else after that. Ability to finance the purchase and settle the purchase is the most pressing issue.