Valuable to Worthless

Everyone is familiar with the idea that a new car loses value the instant you drive it off of the lot. Having it sit there shiny and new is worth something that disappears when you make the purchase. A number of other products have this same property, although we sometimes delude ourselves into thinking they don’t.

I’m not saying that people shouldn’t buy these products (if they improve your life, why not?), but just that we shouldn’t fool ourselves into thinking we’re sitting on something valuable that could be sold to someone else if we no longer want to own it. Any value these things provide is restricted to us as the owner and perhaps we should view their use more as a service, comparable to our daily newspaper or utilities.

Furniture and Appliances

Meg at World of Wealth recently got a used fridge from a tenant in exchange for $275 in rent. She was quite pleased as the unit didn’t have a fridge, and she would have had to buy one before she could rent it to the next tenant. I actually think she over-paid. Having just one property (and my first tenants are still there), I haven’t experienced this personally, but long term landlords get SWAMPED with furniture. A number of people seem to take the view that its easier to just buy replacements than deal with moving it.

The last place I lived in Toronto, when I was looking at it the landlord asked me what furniture I had. I admitted that my current place was furnished, and I didn’t have much. With a smile she told me she could provide me with any of the basics (bed, tables, chairs) until I bought my own, or if I was content with her’s I could just use them. We went over to another one of her properties and in the basement she had a mini-furniture store of things that had been left behind by previous tenants.

My hat is off to landlords who offer a “furnished” suite at a premium price. First they get a free furniture collection from tenants moving out. All they have to do is store the things, than they can get monthly payments from something they got for free. Smart.

Books

I *LOVE* books and had quite a collection that I eventually got tired of moving (a box of books is HEAVY). Having assembled them over the years, I was convinced that they’d be worth at least a couple of bucks to someone. When I got looking into it, it turns out that used bookstores typically just give you credit (so you’re not really selling them, just exchanging them for a smaller number of someone else’s books). Selling on-line is more trouble than its worth (people will just want to buy a couple of books each: meeting them or shipping to them is a pain in the butt).

Eventually I just gave all my books to friends who might be interested (and told them to toss anything they didn’t want or when they were done with them). Those I couldn’t find a home for, I turned in at my home town used book store and gave the credit to my family (so we’ll be getting free books for the next few years).

A friend recently inherited a bunch of books from a boyfriend who moved away and was looking forward to making some money selling them. I laughed and wished her good luck (in the end I think she left them out in her office for anyone who wanted them, then threw the remainder in the trash).

Jewelry

I read once that the early appeal of jewelry was that it was wealth in a concentrated, portable form. Beyond looking nice, it also represented a worst-case security policy for women. If they needed to flee their home, or if their husband unexpectedly passed away, jewelry could always be exchanged for the necessities of life for them and their children.

Da Beers’ well known sales pitch “A diamond is forever” has made sure that few people actually try to sell their diamonds. Sadly when they do, they often find its much harder than they expect. One amusing anecdote involves a computer guy who stole money from the bank he worked at, transferred it to Swiss company in exchange for diamonds, and then couldn’t sell the diamonds. When he was caught, the bank was initially relieved, since they figured recovering the diamonds was as good as getting the money bank. Then they tried to sell the $8.3 million in diamonds and couldn’t find a buyer. The same article relates the story of diamond thieves in New York that sold $50k of diamonds to a fence for $200 (who in turn wasn’t able to sell them).

With artificial diamonds that can be inexpensively created (and are identifiable only because their crystalline structure is too perfect) I would be very nervous buying a diamond that I expected to retain its value in the coming years.

Is there anything you’ve encountered or purchased that you thought would be easy to resell but turned out to dramatically lose value after purchase?