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Don’t Be Tempted! Do your research!

“We are in the middle of a pandemic.”

“Never been here before.”

“Don’t know what’s ahead.”

However, what we do know for sure is that, for all of us, the quality of every business and investment decision that we have made in at least the past five years matters acutely more now than it ever did in the past.

Incomes have evaporated overnight, asset values have shrunk dramatically, borrowing capacity has been dwarfed, and businesses with thirty year track records of providing good incomes have disappeared in an instant like some bunny in a nightmarish magic trick; and we are being told that this is just the beginning.

Whereas three months ago we may have asked whether we invested well enough to have increased our savings by a respectable percentage in recent years, we now ask the question; were our investments and business decisions good enough to create a financial buffer in this crisis? And, how far into the future will that buffer shield us if at all?

One question is about growing wealth, the other may be about survival.

In this new environment, the value of every dollar in hand matters so much more. So does every decision that each of us must make from hereon in because our livelihoods may depend on it, which brings me to the crucial issues that anyone in the market to buy an apartment must consider in the months and years ahead.

With money so tight, buying the cheapest product on the market becomes even more tempting than it would normally.  However, because money is so tight, it is imperative to avoid the temptation to go cheap and to ensure that a purchase is not going to sink you deeper into debt due to major defects that may exist in the building.

Sadly, this consideration is no longer a peripheral issue, major defects have become the norm rather than the exception, so the above scenario is a realistic, highly probable outcome.  One only needs to look up press reports, court lists, and apartment reviews to see that the internet is littered with defect claims for apartment buildings often running into the millions of dollars.

The probability of buying a defective apartment has become more than a fifty-fifty proposition, which might be ok when you are gambling a couple of chips on the blackjack table, but not when you’re betting with a million dollar apartment which, for most of us, represents our life’s savings.

All this with no safety net because apartment towers do not have the benefit of Home Warranty Insurance.

In fact, your only warranty is the reputation and the track record of the builder who has built the apartment complex.  That is why my strong advice to you is, if you are hunting for an apartment right now, before you go paying that crucial deposit, do your homework, do the legwork, and carry out the detailed research on the builder before you part with your hard-earned cash, because your livelihood may depend on it!

Homework means internet research.  The net is a wealth of information and historical record.

Legwork means, driving out to see the builder’s past projects to understand how they have stood the test of time.  You buy an apartment for life.  If the builder’s past projects of say two, three or ten years ago look like ghettos, then that should sound the alarm.

Visiting a builder’s past projects is your time machine ride into what your apartment will look like in the future.  Your million-dollar acquisition is surely worth the small field trip.

Visiting a builder’s past projects is your time machine ride into what your apartment will look like in the future.  Your million-dollar acquisition is surely worth the small field trip.

Another good avenue is to obtain strata reports on a builder’s past projects.  Strata reports document the history of defects, rectification costs, and litigations that may have taken place in connection with the building.  Conversely, if the building were free of major defects, and the builder was responsive and attentive to the owner’s needs, this will also be reflected in the strata report.  The strata report is a history of performance of the building and the builder; the builder’s report card if you like, and for the purpose of research and due diligence, it is gold!

The over-riding message is to accept nothing on face value. When I refer to face value, I’m referring to the glossy brochure and the impressive display suite. I would suggest that you would be best served by forming your opinion based on your own research rather than what a marketing machine is presenting to you. So, when you are given the marketing literature, maybe just gloss over the glossy brochure, but be sure to dig deep into the builder’s actual history.

Despite the pressures of the Covid-19 environment, and however tempting those pressures may be, it is not the time to be going cheap in order to save money, because going cheap inevitably results in a costly, nasty, and painful experience, and in a tight market, those unforeseen costs will have a far greater impact.

Having said that, paying overs on the assumption that expensive is good is not a guarantee of quality either.  The reality is you must do the research or else you will allow yourself to be exposed to a significant downside risk.  The information is there on the public record in one form or another, waiting to be found by the savvy individual who cares about their future and is willing to do the work to protect it.

If you are motivated to carry out your research, and you would like guidance on how to best research the builder, then click here and we will send you our Builder Investigation Checklist complete with relevant links.  You can also register your interest in participating in the next Northpoint Quality Appreciation Tour which will be arranged when Covid-19 restrictions are lifted.

 

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