the-power-of-2-years - Custodian

As we step into a new year, I need to bring up the story of a recently retired client of ours and the importance of holding onto property until the time is right.

This client built a four-bedroom home on 400 square metres in Deer Park for $330,000 in 2007 and sold in November 2017 for $610,000. While she was absolutely delighted with the end result, things didn’t always go so smooth.

Her story is significant for all Custodians.

This client started building wealth later in life, between her 50’s and 60’s, and when the time came for her to retire, she was looking for something to sell.

Melbourne city inner suburbs had been through their cycle but she hadn’t seen much growth at all in Deer Park. In fact, the median house price had only risen by $40,000 from 2007 to 2015.

She called me, telling me that she needed to sell it, that it wasn’t making her money and that she wished she’d never bought it!

What is critical to understand is that during a cycle, after the inner suburbs of a city increase in value, the growth then surges out to the middle and outer areas over time.

I told her she could not sell that property. “Hold it. Trust in the cycle and hold.

Over the next two years she watched as house prices boomed in the western suburbs. When she finally went to sell – when the time was right - her agent received an offer of $550,000 that she declined; it then went to auction and sold for $610,000.

So what happened? Land values for Deer Park simply grew from $332/m² in 2007 to $812/m² in 10 years, but the majority of that growth happened in the last two years. The difference those two years made for her was $240,000.

It’s often said that 90% of us give up in the last 10%. We stop just before the finish line. For those of you thinking about giving up I would say keep pushing and remember the impact an additional two years can make to your profit the next time you think of selling. Most of all, talk to us. We study those numbers, day in – day out.