Any of the posts of the last few days would have saved my good friend, Jack, a lot of money. And even more worries. This story starts about two years ago.
Jack bought two properties off plan in two separate, but related, developments. The contract price was R800 000 each and the agent said that in 12 months time, when the development was completed, Jack can “easily sell each of the properties for at least R1 200 000.” The idea was to then sell one property and use the profit to reduce the bond on the second.
About a year later, when the development was completed and Jack had to start paying, he invited me for coffee, “I want to discuss something with you and I think you can help me,” he said over the phone when he called me. The first property has been transferred to Jack’s name. Because of low rental, he has to contribute R5 000 per month, which is hefty, but with some juggling he can do it. The real problem is that the second property will also be transferred to his name and he cannot afford R10 000 per month in any manner. And, since the property slump started at about that time, he cannot sell for more than R800 000. With costs he is actually going to lose a lot of money!
I don’t know what he did.
But just page back through the posts of the last week and apply the lessons to the following statement: “You can easily sell this property when it is completed for at least R1 200 000.”
Yesterday’s post: by what percentage must the value of this property increase to make that statement true? The answer is: 50%. In Jack’s words: “It would NEVER happen.” Yes, right, unfortunately he and many other people accepted the salesman’s word.
Or what would happen if Jack asked the salesman: “Is this statement based on scientific research or opinion? If it is research, how did you do the research and what is the confidence level?” I can imagine a salesman looking like a gold fish in a bowl!
But even better, I can imagine Jack walking away in search of a better investment.
But the real point is this: by applying the simple things I share with you on The Blue Roof, you can save yourself a lot of trouble and head aches!
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