The (Net) Australian Property Dream

This week, I was in a cafe and (deliberately) overheard:

“Did you hear about Bob’s cousin’s mate? You know, the one with the tan. The really good looking one.”

“Oh, yeah, him. What happened?”

“Well, in 2015 he bought a 2 bedroom apartment in Docklands for $650,000.”

And?”

“He sold it this week for $800,000!”

“Woah, he must be really smart.”

“To make $150,000 in two years, he must be!”

“I heard he went to an exclusive property investing conference in Sydney a few years back.”

“It must have been great.”

“Yeah. He found it on Tinder, @HotPropertyLover”
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Let’s take a moment and do the math for Bob’s Cousin’s mate:

Sale price: $800,000

Minus: Purchase ($650,000)

Tax: ($35,000)

Interest: ($20,000)

Body Corp: ($10,000)

Stamp Duty: ($25,000)

Agent’s Fees: ($13,000)

Property seminar: ($10,000)

Profit: $37,000

Over two years, that’s a 5.7% return. Or, for the math wizards out there, less than 3% per year.

Maybe Bob’s cousin’s mate isn’t that smart after all?

In his book, Inside Real Estate, Peter O’Malley says the costs for transacting property can average 8%, depending on the fees like Stamp Duty.

The Australian Nightmare

How many stories like Bob’s cousin’s mate have you heard in recent years?

The media is all aboard and pushing this property bandwagon higher:

“OWNS 200 PROPERTIES AFTER BUYING 18 PROPERTIES AT THE START OF 2016” – The Daily Telegraph

“Owners band together to get foothold in hot housing market” – Sydney Morning Herald

It’s true.

We love property.

The Australian Dream they call it.

And with property prices currently sitting at record highs and tradies busier than ever, the dream certainly has become a reality for many Aussies.

But the next time someone spruiks a property story, ask them if they are talking about net profit.