Feeling flat after fees

THE job of your real estate agent is to go out to the market and find you the best possible price the market is willing to pay, writes Scott Pape.

REIQ generic house sale

THE job of your real estate agent is to go out to the market and find you the best possible price the market is willing to pay.

 

BARRY ASKS: I wrote to you about whether to sell my one-bedroom unit in a reputable bayside suburb and invest the money, with a view to buying a “home” in three to five years. Unexpectedly, nobody turned up for the auction, not even nosy neighbours. The advertising and conveyancing fees still need to be paid regardless of whether there’s a sale or not (a $4500 lesson for me). This has hit my savings hard. You live and learn!

 

BAREFOOT SAYS: If no one turned up to your auction, you either hired a dud agent or you priced it too high (or probably both — the two go hand in hand). So let’s cut to the guts of it: you’ve decided to sell your property. The job of your agent is to go out to the market and find you the best possible price the market is willing to pay. If you don’t want to accept that, that’s your problem, not the agent’s. Still, I wouldn’t pay him anything until your property is sold and settled. He gets paid when you do. That being said, I’d never agree to pay an additional fee for an agent’s advertising costs — seriously, all you’re doing is paying to promote their agency. It should come out of their heavily negotiated commission. (Note to real estate agents: kindly send your hate mail via Barefootinvestor.com)

ASHAMED, SCARED, WHAT NEXT?

AMY ASKS: My husband earns $150k, which is a lot of money, yet with four kids aged 10-19 we are still struggling. We have lived modestly for the last three years and are better for it. We have even entered into debt consolidation to take back control of our $80k credit card debt. So here are our vital stats now: debt consolidation $65k, novated car lease balloon payment $12k, mortgage $414k (value $550k), other $30k. What should we do?

 

BAREFOOT SAYS: You know things are cra-cra (and not in a good way) when you have a $30k line item labelled “other”. I’m not a big fan of debt consolidation; it’s often sold as a magic pill (and it does reduce your interest costs), yet the real magic is your behaviour. If that doesn’t change, nothing changes. Now, you say you’re living “modestly”. I’d like you to live “aggressively”. Because to get out of the stinking hole you’re in, you need to get angry. You need to swear off debt and say to yourselves “never, ever again”. Then you have to back it up with action: line up your debts from smallest to largest and knock them over, one by one. You’ll know you’re on the right track when you take a second job at night to get debt free quicker.

MY DREAM HOME

JODY ASKS: I’m married with two boys (one newborn) and we have savings of $12k, with no debt. My husband earns $45k, and our family assistance payments will finish in January. I go back to work in April (after six months off) on a part-time salary of $52k. We’d love to buy our own home and send our boys to a private high school, but a 20 per cent deposit seems so far away with average house prices of $500,000. I feel very disheartened. Should we just invest our money instead?

 

BAREFOOT SAYS: This is the story of our time: people on average incomes increasingly can’t afford to live in capital cities. Actually, your family is far below the average income, so you need a plan to address that. Your husband needs to earn more: $45k isn’t going to cut it, I’m afraid. Together, you need to work out a realistic five-year plan to increase his income. Long term, that will give you the biggest bang for your buck, particularly if you continue living like you are now and save the extra he earns.

LATE BLOOMER

LIZ ASKS: I have just signed up for my first mortgage at the age of 56. I saved $110k over 10 years and borrowed $175k. If I pay fortnightly I can own the house outright in just under 10 years. My dilemma is that I will have $15k from the sale of some possessions and am unsure whether to do up the kitchen and bathroom or whack it straight on the mortgage. If I put it on the mortgage, I will own the house outright in 8.5 years, but will be living with an old kitchen and bathroom for that time. What do you think I should do?

BAREFOOT SAYS: At your age, I wouldn’t be making additional repayments on your mortgage. Instead, I’d be pumping your money into super (and talking to your super fund about starting a “transition to retirement” pension strategy, so you pay less tax). The idea is that you can draw down on your super tax-free when you retire, and pay off the mortgage via a lump sum. I’d be inclined to keep the $15,000 in a Mojo online savings account and only spend money on renovations if chipped plaster falls on your head.

DAUGHTER IS A BRAT

NICOLE ASKS: How can I teach my 13-year-old daughter the value of money? She will not stop asking for an iPhone 6s. We have explained to her that we would not spend that much on a phone. She has her dad’s old smartphone at the moment and an iPad that was required for school. I hope you can explain to her that spending top dollar just to have the newest of something is not always a wise use of money.

 

BAREFOOT SAYS: There’s a simple answer to this problem: introduce your daughter to the wonderful world of work. It’s a few years too early to send her down the coalmines, but that doesn’t mean she can’t do household chores for you and get some pay for it. Get her to divide her pay equally into three jam jars: spending (iTunes), saving (iPhone) and giving (for all those kids in Africa who don’t have an iPhone). Kids learn by doing, not by being told. (They also learn by watching — could it be she’s modelling you?)

Barefootinvestor.com

• The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice

Originally published as Feeling flat after fees