The cost of ignorance

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I’ve had my most clear lesson in the importance of being educated in property recently.
I have begun working with an elderly lady who has several properties that she has inherited over the years and is now looking to sell down. She knows nothing about property and therefore has taken no action or done anything with any of these properties to maximise her return. Sadly this has cost her dearly in terms of potential.

The first 3 properties I have examined for her are all bare land. 1 is a 9 unit site in a great suburb BUT she made 2 very costly mistakes through not knowing any rules about land banking.
Firstly the specific location of the land is very poor. In a suburb with lots of water views and only 1 small bad area, this land is in the middle of the bad bit. Had the owner sold it when she inherited it 30 years ago and bought anywhere else in the same area she would be at least 500K better off.
Secondly she has never visited or maintained the property in 30 years so it is now full of huge trees requiring consent to remove. By not keeping the site mowed she has devalued the land by around 300K because of the exorbitant costs associated with site prep and consents etc.

The next 2 projects are vacant sites on an island. Once again they are in a position that almost couldn’t be worse. In this case had they been sold and sites with views purchased she could be nearly 2 million dollars better off!! And once again the sites are covered with huge trees and this makes the sites almost worthless to a developer as you need to buy them for almost nothing to recoup the costs of site prep.

Now the owner will be happy when she sells because they don’t owe her anything and compared with what they were worth when she inherited them it’s all good.

But it has been a great exercise for me to understand how not to land bank. This vendors results could have been approximately 1000% better with a Little bit of education her part to ensure she was holding the right property in the right location.
Thats a LOT of lost opportunity!!

So think about that when you are investing. Make sure you know what you are doing and why. Beating the average investor’s return can make a huge difference to your financial position in the medium term.

Stay Safe Dean Letfus @ www.massiveaction.co.nz (AKA Dean Leftus @ www.massiveaction.co.nz)

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