I've Bought Hundreds of Properties. These 4 Types I'd Never Touch.

I've been involved in hundreds of property transactions across Melbourne. Helped clients buy everything from $350,000 houses in Geelong to $1.2 million family homes in Ringwood. And through all of that, I've built a mental blacklist — four categories of property that I will not buy, will not recommend, and will actively talk clients out of.

These aren't edge cases. They're the four most common traps in the Australian property market, and new investors walk into them every single week.

Trap 1: CBD high-density apartments

The pitch sounds great. Central location, walking distance to everything, strong rental demand from students and young professionals. The brochure shows a rooftop pool and a concierge.

The reality is brutal. CBD apartments in Melbourne have been the worst-performing asset class in Australian residential property for over a decade.

The fundamental problem is supply. When you buy a house, you're buying land — a finite resource that cannot be replicated. When you buy an apartment, you're buying airspace — and your neighbour can build more airspace right next door, and the developer two blocks away can build 400 more units of identical airspace next year 1.

There is zero scarcity value in a CBD apartment. None.

Add to that the body corporate fees. A typical two-bedroom apartment in Docklands or Southbank runs $6,000 to $12,000 per year in strata levies. That's before any special levies for building defects — and Melbourne has had a wave of cladding remediation levies since 2019 that have hit some buildings with $15,000 to $30,000 per-unit special assessments 2.

Rental yields look decent on paper — maybe 4% to 4.5% gross. But once you strip out strata, your net yield drops below 2%. And capital growth? The Docklands median unit price is lower today than it was in 2015. You're paying a premium to lose money slowly.

We have a hard rule at PremiumRea: no apartments. No townhouses with less than 300 square metres of land. No strata-titled anything. If we can't point to the dirt and say "that's yours," we don't buy it.

Trap 2: The 'big land, broken house' fantasy

This one traps experienced investors who should know better.

The thinking goes: buy a big block (800+ square metres) with a derelict house, hold it for the land value, and eventually develop it into townhouses or subdivide.

In theory, that works. In practice, the holding costs eat you alive.

A large block with a broken house generates terrible rent — maybe $380 to $420 per week for a run-down three-bedroom. On an $850,000 purchase, that's a 2.3% gross yield. After loan interest (assuming 80% LVR at 6.5%, that's $44,200 per year), council rates ($3,500), insurance ($2,800), land tax ($2,200), and maintenance on a crumbling property ($5,000+), you're bleeding $20,000 to $25,000 per year 3.

The development play you're waiting for? DA approval alone takes 6 to 18 months. Construction takes another 12 to 18 months. Total timeline from purchase to completed development: 3 to 4 years minimum, during which you're haemorrhaging cash.

And here's the kicker: at today's construction costs, the development margin on a 3-unit subdivision in Melbourne's middle ring is razor thin. Build costs have increased 30% since 2020. A project that pencilled at $250,000 profit in 2019 now pencils at $80,000 — before you account for holding costs and interest on the development loan.

Our approach is different. Buy a property that generates positive cash flow immediately through renovation or conversion, and preserve the development option for later. Don't bet three years of negative cash flow on a development that may or may not work.

Trap 3: The 'investment that doubles as a home' delusion

"Joey, I want something I can rent out now but move into in five years."

I hear this at least once a week. And every time, I have to explain why this thinking leads to the worst possible outcome on both fronts.

Investment properties and owner-occupied properties optimise for completely different variables. An investment property optimises for: rental yield, land-to-value ratio, tenant demographic density, and development potential. A home optimises for: school catchment, street feel, kitchen layout, and whether you like the neighbours.

The suburbs that produce the best investment returns are not the suburbs you want to live in. Hampton Park produces 5.5% yields and 8% annual growth. It's not a suburb most professionals aspire to call home. Toorak is a lovely place to live. It produces 2% yields and has underperformed the Melbourne median for a decade 4.

When you try to split the difference — buy something "decent" in a "reasonable" area — you end up with a property that's mediocre at both. The rent doesn't cover the mortgage. The growth is average. And when you eventually move in, you discover the kitchen layout that was fine for a tenant drives you crazy.

Separate the decisions. Buy your investment property purely on data. Buy your home purely on lifestyle. Never combine them.

Trap 4: No-land townhouses and off-the-plan traps

One sentence you need to tattoo on your brain: buildings depreciate, land appreciates.

The ATO literally acknowledges this. You can claim depreciation on a building because it loses value over time. The structure, the fixtures, the fittings — all depreciating assets. The land underneath? That's the appreciating asset. That's where your wealth comes from.

A townhouse on 150 square metres of land gives you very little land exposure. A house on 600 square metres gives you four times as much. Over a 10-year period, the capital growth differential is enormous 5.

Off-the-plan purchases amplify this problem. The developer prices in their profit margin (typically 15-25%), their marketing costs (3-5%), and the selling agent's commission (2-3%). By the time you settle, you've paid a 20-30% premium over the actual market value of the finished product. And the building component — which comprises 60-70% of an off-the-plan purchase — starts depreciating the moment you get the keys.

We tell every client the same thing: if it doesn't have at least 400 square metres of land in your name, it's not an investment. It's a consumption item masquerading as an asset. Build your portfolio on dirt, not on developer marketing budgets 6.

These four traps account for roughly 80% of the bad property purchases I see. Avoiding them won't guarantee success — you still need to buy in the right location, at the right price, with the right strategy. But avoiding them will guarantee you don't join the long queue of investors who learned these lessons at a cost of $50,000 to $200,000 in lost capital.