Ask Firebug Fridays 19

by Aussie Firebug | Aug 2, 2019 | AFF

Nothing written below is financial advice. The below questions and answers are for general information only and should not be taken as constituting professional advice. You should always do your own research when making any financial decisions.

Question (5:14)

Hello,

I saw this article pop up recently (link) from the co-author of Your Money or Your Life (a great read) and was wondering what your thoughts on this are.

Have you considered or planned on finding ways to give back to your community once you achieve the RE part of FIRE?

What would some of these ways be if you did?

I know a lot of people talk about RE to have the time to spend on hobbies and family, but it’s a rare thing to hear about giving our time to those around us and I think it’d be great to start that conversation in the FI community.

-Jackson

Firebug’s Answer

Hi Jackson,

Please excuse my tardiness with this reply being over 7 months old.

Your email made it into the ‘interesting questions’ folder in my Aussie Firebug inbox. I love all the questions I receive but often I will get the same question over and over again and I know the listeners out there won’t want to hear my opinions on them repeated.

With that said, the article you linked to was great and Vicki Robins has once again, articulated what many of the FIRE crowd will most likely end up doing.

FIRE sometimes gets a bad rep. It can be perceived to be selfish because there’s so much focus on building wealth that a few link this to greed. But from every single person I’ve personally spoken to and most I’ve messaged online, this couldn’t be further from the truth.

FIRE chasers are some of the most generous, environmentally conscious, selfless people going around and the majority give back from my experience.

I do have plans on giving back for sure!

In fact, I’m already creating content that thousands of people read/watch/listen to every month so in a way, I’ve already started. Now you could, of course, say that I’m receiving a financial incentive to keep this site running with my sponsorships and affiliates which would be a fair call. But I didn’t start this site with the intention to monetize it, it’s been an unexpected benefit for sure but I just absolutely love talking about FIRE from an Aussie perspective and would have continued to do so with or without the bonus income.

I have some big plans when I hit FIRE and come back to Oz, to really engage with the community more. I’ve spoken to the big guns at the premiere of Playing With FIRE and all the camps, financial conventions, group meetups sound like an absolute blast. I want to get involved in this and dedicate some of my time to get some stuff up and running.

Travelling around and teaching people about FIRE would be the ultimate ‘giving back’ activity for me. It’s such a natural progression too. I don’t really think I can call myself a master of anything except for when I hit FIRE. I’m pretty confident that after around ~10 years of talking the talk and walking the walk people are going to have faith that this dude know what he’s talking about when it comes to reaching FIRE in Australia. This blog is a testament to what can be achieved through discipline, delayed gratification and a touch of common sense investing.

I would also like to donate my time to various groups within my local community that are in desperate need of volunteers.

I would love to know what others are planning to do too. Please let me know in the comment section.

-AFB

Question (16:52)

Hi Firebug,

Love the site and podcast. I am wondering if it concerns you how popular passive investing is becoming and the impact of large amounts of money flowing into companies somewhat blindly?

Bec

Firebug’s Answer

Hi Bec,

This is a great question and one I’ve often thought about too. The thing is, there’s really no such thing as an ETF bubble. ETFs are tools, not catalysts.

They are a vehicle to give investors access to certain securities and sectors.

I guess it does depend on your definition of the word bubble in the context of investing and maybe the semantics of it.

Blaming a stock bubble on ETFs would be like blaming the invention of smartphones for Instagram, MP3s for Nickleback, or Television for the absolute abomination that was season 8 of Game Of Thrones (how could Dani not possibly see the ships from above???)

ETF just provide a different way to access something that was already there.

Nearly 100% of the time I have read about someone blaming ETFs for supposedly causing a bubble has come from a fund manager or someone who makes money from the belief that it’s better to be an active investor vs passive which has been proven time and time again to be a fallacy for the majority of investors.

The issue is that there’s a bloody ETF for everything these days including very bubble-like assets (think bitcoin). This gives the impression that it’s the ETFs themselves causing the bubble-like mania. But it’s never the vehicle that’s the bubble, it’s always the asset class.

You could argue that ETFs provide easier access to these bubble assets classes and help them grow. That would be a fair call. But you’d have to be pretty thick to invest in something just because it’s an ETF. I’d like to think the majority of investors look at the underlying assets they’re investing in before buying. And if the underlying assets are good, I don’t really see an issue with how ETFs make them available for us the investors to buy.

-AFB

Question (21:00)

Hi Aussie Firebug,

Thanks for the blog and podcast.

Like you, we plan on transitioning from shares and real estate to all shares, EFT & LIC.

To simplify things and increase income generation. We had planned on using one of the self listing options when selling our investment properties to avoid the agent’s fees, so we were interested to hear that you had done this with the sales of IP1.

Can you give us some details of the process and lessons learned? Will you do it again for IP2 and IP3?

– Bradley

Firebug’s Answer

Hi Bradley,

I’m glad you’re enjoying the content mate 😊

The company I used was called property now and I estimated that I saved around $15k by selling the property myself.

I got quoted something like 2.5% plus advertising fees which would have worked out to over $15k to sell IP1.

But I’m frugal AF so there ain’t no way I’m paying that much when there are tools available to do it yourself. I could save a heap of money and learn new life skills such as negotiating which I’ve always wanted to have a crack at.

Win-win.

You always are going to some people saying…

“You should always let a professional handle stuff like that. It’s part of the cost of investing in property and they will be able to get a much higher price for you vs if you do it yourself.”

I don’t subscribe to that line of thinking at all.

I would never pay that sort of money for a potentially higher selling price an agent could get me vs a guaranteed savings of ~$15k. There are other benefits that come with paying an agent which I’ll get into later but just know that no one will ever care about your house as much as you and this isn’t rocket science.

Sometimes I think people feel like you need a PhD in selling houses to list a property. They’re scared they’re ganna stuff something up but the reality is that’s it’s actually pretty straight forward and simple.

It’s a bit of work, there’s no getting around that. But like I’ve always said with property as an investment class, there are a lot more problems to be solved yourself vs shares which can be a good or bad thing depending on the type of investor you are.

The hardest part is knowing how much your property is worth. I used a subscription-based site called Price Finder to work out how much similar properties around the area were selling for. I have a family member who is a real estate agent so I was able to access her account for free which was nice.

That tool has an incredible map feature where you can select your house and set an area around it and it returns similar properties with how much they sold for. It even lets you specify things like the number of rooms/bathrooms/garage spots etc. I don’t know how they source their data but it’s pretty incredible that people can access it. Researching IP1 was easy for me because it was in a cookie-cutter estate where the houses are essentially the same.

Once you have your ballpark figure, photos of the property and some copywriting you’re ready to list it.

I wasn’t aware but you have to have a licence to list on the various websites like realestate.com and domain. Using a service like I did with Property Now lets everyone list for a fraction of the price.

Because let’s be honest. Does anyone go anywhere but the internet when they’re trying to buy a home these days? It’s not like real estate agents are useless. It’s just that technology has created tools that make selling a property fair more efficient than it use to be.

Think about it.

It wasn’t too long ago that real estate agents were the go-to people when you wanted to buy and sell a property. This makes sense too. They had built decades are trust with that area and simply had too many relationships and connections that you’d be mad to try to advertise yourself. They knew exactly all the avenues to go down and probably had deals with the newspapers etc. to ensure that all bases were covered.

I would have paid for that experience and connections if modern-day tools weren’t available.

But they are.

And IMO the fee structure for real estate agents have not caught up to 2019 and as more and more people start selling homes themselves, people will start to realise that it’s actually not that scary and I predict that it will become a lot more ‘normal’ in the years to come.

The process for selling a property yourself is as follows

• Be prepared before you list online. Have you ball-park figure, photos, copywriting and conveyancer all sorted.
• List on all the major sites (usually comes with a package)
• Host an open day the first weekend it becomes listed
• Sell when you find a buyer
• Nearly all the companies that provide this sort of service have a really good cheat sheet in case I missed anything but that’s the gist of it.

There are a few things I would do differently if I had my time again though.

• Pay the extra money to have your property featured as a ‘premium listing’. It’s the most expensive option (around $1,000 from memory) but it pales in comparison to what the agents charge you and it’s supercritical in a high demand area like I found out with my property.You ideally want to have the house sold within the first 2-3 weeks. Paying for the premium listing means your property jumps to the front of the search results for your area. It’s similar to having your webpage ranked high in Google.It can be the difference between you getting swamped with calls or having no one show up to your open day.
• Know your ‘number’ before you list and stick to it! I actually had an offer that was over my reserve and more than what I eventually ended up selling it for within the first 3 days.Like a classic greedy idiot, I decided to wait a bit because my phone was blowing up and I had a lot of interest on the open day. Well a week later I had all my offers and that first one was still the best. I went to ring the party and what do you know, they had their offer accepted for another house.Lesson learned.I should have drawn up the contract ASAP when someone offered me some at or above what I was willing to sell for. Trust me, you start to play the ‘what if’ game when your property gets a lot of interest. But the hottest time for your property will always be the first week or two. After that, it fades… a lot. I had to wait another 4 weeks until I found another offer and your minds starts to play tricks on you once the buzz from the first weeks dies down.
• Really put in the work in the first two-three weeks. Open houses every weekend. You don’t want your property to still be sitting there after a month. It can be viewed as stale and what a lot of people do is pay the package again to have it ‘relisted’ so it jumped back to the top of the search.Don’t be in this boat.Make sure your ‘number’ is reasonable and within the range that houses similar to yours are selling for. Shake the hand of the first person that offers your ‘number’ or higher and be done with it.
• This one is so controversial but it has to be said.Underquoting.This is when people list a property at a price that they have absolutely no intention of selling it for.Why do they do this?

  To attract a lot of attention and hope someone falls in love with the place I guess.

  I’m pretty sure it’s meant to be illegal but everyone does it. I made the stupid mistake of actually listing my asking price and still to this day I think my attendance rates suffered because of it. I was watching the sales of similar property around the corner from mine selling around my asking price, being listed $40k-$50k cheaper than mine.

  The most depressing this is that the buyers expect this to happen and I even had one bloke stumble across my open day and asked me what my reserve was. I said it’s what it’s listed at mate but he insisted that he actually wanted to know the real price. I told him again that it what it’s advertised at. He said that he had family who were looking to buy in the area and didn’t bother coming to my property because it was listed so much higher than the others.

  🙃🔫

I really enjoyed the lessons learned from selling IP myself. I will definitely be doing it again in the future where it makes sense.

I will use an agent if it needs to be done. Like right now, it wouldn’t make sense for me to fly back to Australia to host a few open days for IP2 and IP3. The commission fees are going to be a lot lower for those properties because they aren’t worth as much as IP1 was too.

They aren’t listed yet but the lending market is on the upswing and I’m watching that space very carefully.

Another thing I want to mention is that you really need to be the right person to sell a property yourself. You need confidence, especially when it comes to negotiating. I wish I could say everyone has this because it’s such a valuable life skill when it comes to a whole bunch of stuff.

But if you’re the sort of person that gets anxiety thinking about asking for a raise, bartering with the locals in Bali or trying to wheel and deal the best combo of Shinies you can score for your ultra-rare Charizard then maybe it’s worth paying for someone else to do it.

And that about sums it up Bradley.

Agents have their place and can be useful for sure, I may even end up using one out of convenience sake. But the internet has open up doors that were not there previously and you can definitely save a lot of money doing it yourself.

We’re the FIRE crowd after all. We thrive on the challenge of doing it ourselves amairight?

Hope that helps.

-AFB