You don’t deserve to make money on property

 

It occurs to me as I’m watching The Block on Sunday evening, a show I don’t often find myself in front of, that Australians have a fundamental belief that they:

  • have a right firstly to own property,
  • and secondly to make a lot of money by renovating and selling property.

It’s a common misguided belief that property sits outside of every other free-market in Australia and operates its own set of rules…

Those rules being that real estate only ever goes up in value.

As three out of the four properties are passed in not meeting the reserves, I wonder if this is not proof enough that property values can travel in any which direction.

Still I hear one of the contestants consoling another teary-eyed renovator with words to the effect of ‘you worked so hard, you didn’t deserve this’.

And therein lies the problem. Australians truly believe that they absolutely deserve to buy a property, hold it for a short period of time, give it a coat of paint and a new kitchen, and they should reap fortunes from the hasty sale.

Unbelievable still is how dismissive many are of such a previous failure having occurred, putting it down to bad weather on auction day, and diving head first into giving it another crack.

You don’t deserve to make money on property

Property can play an important role in any portfolio. But you need to consider your timeframe (it should be long) and the costs involved with owning a property. All of this forms part of your cost base, a fact often left out of the equation when calculating a profit made on the sale of the property using the buy and sell price only.

Particularly if borrowing to invest, ask yourself if you’d ever consider borrowing that amount of money to invest in any other asset. It’s a good sanity check question! Most people borrow far more than they should and far more than they ever would for any other purchase.

Over recent months, we’ve seen property trend downwards. Some figures indicating up to 10% has come off the market since December 2010. Still, consumer sentiment remains fixated on properties being a solid and secure investment you couldn’t possibly lose money.

I’m hoping the recent episode of The Block has at least got people thinking!

It might be time to wake up Australia and make more realistic property investment decisions.

Want to chat to the WE team about your property or renovations? Book in a time for a Free Strategy Session.

 


Disclaimer: Information contained within this article is of a general nature. Do not be rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.