Here I go again, I thought wryly. Who is the idiot who invented giving things for free when there is an unseen cost to it?
I was meeting a client, explaining to him about property investing in Melbourne. There are certainly many differences between investing a property in Melbourne and Singapore. But one question that is constantly asked is: If I pay for property management (to a property manager) and tax management (to a tax agent), doesn’t it increase my cost of owning the property? Can I ask my friend who is staying in Melbourne to do it for me to save costs?
Quality products do not come cheap. Cheap products are never good.
I have never believed in free things. Quality products do not come cheap. Cheap products are never good. I had a reply to that before. Someone told me that hawker food is cheap and good. Not neccessarily so, I replied. When we go to a restaurant, we are not just paying for the food: we are paying for the ambience, the lighting, the comfort, the cool air, and the pleasure of being served. All these come with a price. If we do not or unwilling to pay for the cost, the restaurants would just close down. And we will not be able to enjoy it anymore. Hawker food is cheap precisely because their cost of operation is low!
Would you work for your boss if today, he tells you he will only pay 50% of your income?
Something or even some knowledge that anyone has spent time and effort is doing, making or researching, has to be paid accordingly. If he isn’t paid accordingly, he will not be able to sustain his life. Who doesn’t have a family to feed, children to raise, parents to look after or even other responsibilities? Or, let’s put it this way. If your boss asked you to work for half of your income, would you do it? Or would you agree to it, but spend 50% of the time surfing the internet, or selling and buying your shares? Isn’t it a natural response if you are not paid accordingly for YOUR services rendered? If so, why would you do the same to another person?
The Value of a Tax Agent and Property Manager
I think at the end of the day, it is the value of having a tax agent, a property manager or even a surveyor that some of my clients seem to be missing out. For example, the value of having a tax agent is tremendous: he basically helps the owner save money by providing services to his clients regarding liabilities and entitlements under taxation laws. He advises clients or represents them in dealing with the Commissioner of Taxation. He also prepares tax documents and lodges them for assessment, determination, notice or decision. In this way, he makes sure that your tax is correctly paid and all your deductions are correct. If you tried to do this yourself, you may missed out some tiny detail, or you didn’t know that you can claim for this deduction so you might be taxed more due to a larger taxable income.
A property manager helps you with your rental. If your tenant decided to break lease, he will help you to get the next tenant quickly. He monitors the rental around your property, so that if it increases, you will know and decide whether you want to increase the rental (sometimes, you may not want to increase it if you have a very good tenant). Don’t you think all these services needs to be paid accordingly?
The Right to Demand
The most important thing about paying for services is this: if you pay for a services, you have a right to demand or ask for services. If you are not paying for the services, you do not have the right to demand. The ladies would know of this: when you have free samples for your cosmetics, how many can you ask for? Only 1, isn’t it? And the amount is so little, it’s barely enough for you to use, isn’t it?
Asking your relative to manage your property in another country, is the same thing! Your relative is probably busy working. Will he have the time to monitor the rental rates? Will he have the time to travel to your property (let’s not forget that Melbourne is much, much bigger than Singapore!) When tenants break lease unexpectedly, will he know what to do? Well, since you are not paying him to manage your property, then, you can’t really demand much from him, isn’t it?
Vast Difference between Fundamentally refusing to pay VS Inquiring about the Price of Services.
Someone who is asking for the price of these services knows the value of these services. Basically, he just wants to compare the prices, and input these figures as part of the cost of investing a property.
A person who fundamentally refuses to pay for these services might not even have the means to pay for the monthly instalments. Hence, he is just trying to cut the cost of ownership to a price that he is comfortable with. Sometimes, these people do not even have the recommended emergency funds set aside for investing in a property investing (it is 8 – 10 months of the monthly instalment for the property. Naturally, the more properties one invest in, the more funds one will have to set aside.).
To these clients, maybe you are just not ready to invest in property – it might be insufficient knowledge, finances and many other reasons.
How do I know that I am ready to invest in property?
You will know whether you are comfortable to invest in properties: You are excited, willing to pay for the necessary services, did your calculations etc. Generally, you feel good about investing.
How do I know that I am not ready to invest in property?
You will know.
Your instincts will tell you.
You feel uneasy and nervous.
However, you have to ask yourself, honestly and truthfully, why you are uneasy. Asked yourself whether it is just unfounded fears or genuine fears? Are you:
- afraid of the risks of property investing? (Not a genuine fear because all investments are subjected to some risks and property investing is the safest investment. The return for property investing is a long term process. Hence, one must ensure that one has calculated his sums properly before investing.)
- afraid that you are not able to keep up with the monthly instalments? (Genuine fear. Hence, financial calculations must be done before investing in properties.)
- afraid that you make the wrong choice? (Not a genuine fear.There is no such thing as a perfect choice. There is pros and cons. It is through knowing clearly what you want for your children, your parents, your spouse and yourself, that you can make the right decision. Know that for every investment, there is a risk. Ask yourself: can you manage the risk? If you can, then go ahead. If you cannot, then you will have to let it go. After that, be at peace with your decision.)
So, if you are feeling uneasy, ask yourself why and find the reasons behind the uneasiness. One of my clients felt uneasy about investing in Melbourne because she was afraid that the floods will damage her property, until I reminded her that Melbourne is 8,800 sqkm and the flood was not in Melbourne CBD!
So, not wanting to pay for services, is just a cover-up for your genuine or unfounded fears!