Pay Peanuts, Get... What?
Pay peanuts…
Get…
Monkeys…
Have you heard the saying before?
If you pay peanuts, what do you get?
Monkeys.
Basically, if you pay a small amount, a low wage to an employee, for example
Then you will get low quality outcomes, or staff.
What do you expect? Pay peanuts, get monkeys.
(The term paying peanuts is attributed to Harry Stevens, an English immigrant selling peanuts in NYC in
1895. He used to joke he was “working for peanuts”).
When I was younger, this did not really resonate with me.
Why pay more? When you can pay less for the same?
But, in reality, it is never really the same is it;
Buy a poor quality pair of shoes and the sole wears out or heel comes off (extra monetary cost more).
Pay a cheap graphic designer to create a brochure, and have to keep redoing it (time cost/opportunity)
Buy the cheapest seats on the plane/cheapest airline (comfort cost, more on this below).
The opposite of paying peanuts?
It’s better to pay too much, than too little…
John Ruskin, the 1800's artist, says it well;
"It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little
money - that's all.
When you pay too little, you sometimes lose everything, because the thing you bought was incapable of
doing the thing it was bought to do.
The common law of business balance prohibits paying a little and getting a lot - it can't be done. If you
deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have
enough to pay for something better."
This applies to modern life.
I foolishly took an AirAsia flight last week.
Waited for 40 minutes in the "fast track" queue, only to be told I was too late to check bags in (after they
told me it would be fine).
“We can put you on the overnight flight (10 hrs later) if you wish?”
Ran down stairs, put checked luggage into a storage container.
Back into the bag weighing queue to get to immigration.
Lady in front of me turned away for being 0.4kg over.
Ran to the plane, "hurry, hurry, gate closing!" was the cry, final call showing from 50 mins before take off.
Get there, sweating, stressed, considering the hidden costs of my decisions.
Only to sit on the ground for a hour.
Electricity went halfway through flight, no power sockets or hot water.
Of course, no WiFi.
C'est la vie.
Lesson learned.
It’s the same with property.
Buy a quality property in a quality location and you will get quality tenants, who respect rent payment and
your property.
This has always been my preferred approach, pay a bit more for something quality, it a top notch location.
Yes, you pay more than the flat a few streets over, but you gain a clear conscience, less worry, good
tenant (poor ones are ‘priced out’), rent on time, the mortgage being paid down on time, low maintenance
cots, low replacement tenant costs, more headspace to think about your next move, future plans not
impacted…
I often hear people say something like… ”I have found XX property in XX place at £65k! It’s a house
and the yield is 18%! I can buy 4 of them!”
What they do not consider…
Perhaps poor tenants? Loss of rent if they stop paying? Extra cost to repair damages? Cost to find new
tenants? Cost of legal bills? Cost of your property not going up in value as the area is not great? Cost of a
lack of quality employers in the area? Mental cost of worry? Opportunity cost as you can’t focus on the
next property? Or can’t be present your family?
Something to think about anyway.
“Buy well, and you buy once”
Don't pay peanuts.
Or you will end up paying the price.
Think a friend would like this? Forward it their way.
Have a great Saturday ahead,
Callum