---
title: "Three Property Decisions That Turn Smart People Into Financial Labourers"
description: "Buying apartments as homes, purchasing house-and-land packages as investments, and amateur development are three mistakes destroying migrant wealth in Australia. Real numbers, real casualties."
author: Joey Don
date: 2023-07-31
category: Investment Strategy
url: https://premiumrea.com.au/blog/three-worst-property-mistakes-destroying-migrant-wealth
tags: ["property mistakes", "apartments", "house and land packages", "development", "migrant wealth", "Melbourne", "negative gearing", "GST"]
---

# Three Property Decisions That Turn Smart People Into Financial Labourers

*By Joey Don, Co-Founder & CEO at PremiumRea — 2023-07-31*

> I have watched hundreds of intelligent, hardworking people make three specific property decisions that condemned them to decades of unnecessary financial struggle. Every single one of these mistakes is avoidable. Every single one is still being made right now.

A lot of people make poor financial decisions and then work themselves into the ground trying to recover. Especially new migrants. I say this not to criticise but because I genuinely want to see Chinese-Australians build a reputation for being sharp, strategic, and financially literate — not for being easy targets.

People come to Australia after spending hundreds of thousands on education and immigration. They work incredibly hard. They are diligent at their jobs, generous with colleagues, and often take extra shifts or weekend courses to advance. On the micro level, they are doing everything right.

But on the macro level — the big decisions, the ones that determine whether you spend 20 years building wealth or 20 years digging out of a hole — too many people are making catastrophic errors. And three mistakes in particular keep showing up over and over again in my consultations.

I am Joey. I only speak truth and only do real work.

## Mistake one: buying an apartment as your primary home

There are exactly two situations where buying an apartment as your primary residence makes financial sense. First, you are so wealthy that the apartment purchase price is pocket change relative to your total portfolio. Second, you are a single woman who feels genuinely unsafe living alone in a house in a quiet street.

Outside those two scenarios, buying an apartment to live in is one of the most expensive decisions you can make.

Let me run the numbers. A house in Melbourne purchased at $700,000 today will, based on historical averages, be worth approximately $1.4 million in ten years. Houses on land in supply-constrained suburbs have consistently doubled over ten-year cycles in Melbourne.

An apartment purchased at $700,000 today will, based on the same historical data, be worth approximately $700,000 in ten years. Apartment values in Melbourne have been functionally flat for the last decade when you account for inflation. The building depreciates. The tiny sliver of land attributable to each unit barely moves. You are buying a depreciating asset and pretending it is an investment.

But it gets worse. Apartments come with body corporate fees. A new apartment in Melbourne typically costs around $10,000 per year in body corporate. Over ten years, that is $100,000 in fees you would not pay on a house.

So the house buyer ends up with $1.4 million in asset value. The apartment buyer ends up with $700,000 in asset value minus $100,000 in body corporate fees, so effectively $600,000 in net position. That is an $800,000 gap. Over ten years, that works out to $80,000 per year — which, by coincidence, is roughly the average Australian salary.

In other words, one hasty decision to buy an apartment instead of a house costs you the equivalent of working an entire year for free, every year, for a decade. You have literally chosen to be a financial labourer.

Some people argue that apartments in premium suburbs hold their value better than average. That is partially true. An apartment in Toorak will outperform an apartment in Docklands. But it will still underperform a house on land in the same suburb by a wide margin.

The fundamental reason is simple. When you buy an apartment, you are buying a share of a building. The building is a depreciating physical structure — the roof degrades, the plumbing ages, the common areas wear out. The strata body corporate levies special assessments to fund major repairs. Every dollar spent on building maintenance is money that house owners do not pay.

A house on 600 square metres of land in Hampton Park purchased at $590,000 generates $850 per week in rent after renovation. The same $590,000 spent on an apartment in the inner suburbs generates perhaps $450 to $500 per week with body corporate eating into the net return. Over ten years, the house has doubled in value to approximately $1.2 million. The apartment has moved from $590,000 to maybe $650,000 if you are lucky.

I am not opposed to people living in apartments if that suits their lifestyle. I am opposed to people treating apartments as investment vehicles when the data categorically shows they are not.

## Mistake two: buying a house-and-land package as an investment

I have had over a hundred consultations where the client has proudly told me they bought a house-and-land package in a growth corridor as their investment property. When I ask why, the answer is always some variation of 'my accountant said the depreciation would give me great negative gearing benefits.'

Let me explain why this thinking is backwards.

A house-and-land package in a new estate typically has a composition of roughly 40 per cent land and 60 per cent building. You are paying $250,000 for the land and $400,000 for the house. The building starts depreciating the day it is finished. The land has to compete with the developer's next release of 500 identical lots three streets away.

Compare that to an established house in a supply-constrained suburb: 80 per cent land, 20 per cent building. The land appreciates because no new land is being created. The older building depreciates modestly, but since it is only 20 per cent of the purchase price, the impact is minimal.

The depreciation benefits of a new house-and-land package are real, but they are compensating you for an asset that is losing value in the component that matters. You are getting a tax deduction on the very thing that is making your investment worse.

I had a real conversation with someone who bought a house-and-land package two years ago. The house still has not been built. When I asked if he had reconsidered, he insisted he could sell the contract at a profit. He could not explain the mechanism by which a contract for an unbuilt house in a suburb with unlimited supply would appreciate. He was rationalising a bad decision because admitting it was too painful.

Meanwhile, the developer who sold him the package drives a Porsche. The sales agent who closed the deal is on their third European holiday. And the buyer is still making payments on a vacant block of dirt.

## Mistake three: amateur property development without understanding GST

This one makes me genuinely angry because the losses are so large and so unnecessary.

I have had well over a hundred consultations with people who jumped into property development — subdivisions, townhouse builds, dual-occupancy projects — without understanding the GST Margin Scheme. Some of them did not even know what GST stood for.

Here is a real example. A Chinese-Australian middle-class family ignored my advice and purchased a large lot in Glen Waverley for $1 million. They spent $1.5 million building two luxury townhouses, front and back. The project went to auction. Both properties failed to sell. They were eventually sold off-market for $1.25 million each, totalling $2.5 million.

On the surface, it looks like they broke even. Purchase plus build cost of $2.5 million. Sale proceeds of $2.5 million. Zero profit, zero loss.

Except they forgot about holding costs. Two years of mortgage interest on a $2.5 million project at commercial development rates cost approximately $300,000. Stamp duty on the original purchase was around $50,000. And the GST liability on the sale of new residential property — which they had not structured correctly — added another $100,000.

Total actual loss: approximately $450,000. That family's entire savings from a decade of hard work, gone. And they thought they broke even.

Development can be incredibly profitable when done correctly with proper tax advice, realistic market assessment, and experienced builders. But walking into a development project without understanding GST, holding costs, and sales risk is not investing. It is donating money to the ATO.

If you are going to develop, get a quantity surveyor's report before you commit. Understand the GST Margin Scheme inside and out. Model a worst-case scenario where both properties sell 15 per cent below your target. If the project still works under those conditions, proceed. If it does not, walk away.

Let me expand on the GST issue because it catches people out more than any other single tax trap in Australian property.

When you build new residential property and sell it, GST applies to the sale. If you are registered for GST (which you must be if your turnover exceeds $75,000), you charge GST on the sale price and remit it to the ATO. The Margin Scheme allows you to calculate GST on the margin — the difference between sale price and purchase price — rather than on the full sale price. This can save tens of thousands of dollars.

But here is where people get caught. You have to elect to use the Margin Scheme before settlement of the original purchase. If you buy the land without electing the Margin Scheme, you lose the option permanently. You are then stuck calculating GST on the full sale price of each new dwelling.

On a $1.25 million townhouse sale, GST on the full sale price is approximately $113,600. GST on the margin (if you bought the original land for $1 million) would be approximately $22,700. That is a $90,000 difference. From a single line on a single document that most people do not even know exists.

I have literally watched families lose their life savings because they did not understand this mechanism. The developer who sold them the dream of easy development profits did not mention it. The real estate agent who encouraged them to 'have a go' did not mention it. And by the time their accountant discovered the problem, it was too late.

If you take nothing else from this section, take this: do not enter property development without a quantity surveyor's report, a tax advisor who specialises in property GST, and a worst-case financial model that accounts for construction delays, cost overruns, and sales 15 per cent below target. If the project still works under those conditions, proceed carefully. If it does not, walk away and invest in established property where the returns are more predictable and the tax traps are manageable.

## The common thread: being diligent in the small things while careless in the big ones

The pattern across all three mistakes is identical. Smart, hardworking people apply enormous effort to small decisions — comparing electricity providers to save $200 per year, driving to a cheaper petrol station, negotiating a $5 discount at the market — and then make $500,000 errors on the decisions that actually determine their financial trajectory.

I see this pattern because I sit in the middle of it. My clients come to me after they have already made one or two of these mistakes. The apartment buyer who now wants to build an investment portfolio but has $800,000 less equity than they should. The house-and-land buyer who is underwater on a property in a growth corridor that is not growing. The amateur developer who is still paying down the debts from a failed project.

The fix is not complicated. It is a shift in where you allocate your mental energy and your financial capital.

Buy houses on land in supply-constrained suburbs. Ensure land represents at least 80 per cent of the purchase price. Target established areas where no new lots are being created. Use professional buyer's agents who have actual track records — ask them directly how their clients' properties have performed, and demand data, not stories.

Our portfolio across 350-plus properties averages $709 per week in rent and 15.7 per cent annualised capital growth. I share those numbers not to brag but to establish that the alternative to these three mistakes actually works. You do not have to be a financial labourer. You have to make better big decisions.

I am Joey. I only speak truth and only do real work.

The good news is that correcting course is always possible. I have clients who came to me after buying an apartment, after purchasing a house-and-land package, even after a failed development. The apartment buyer may have lost a decade of potential capital growth, but they still have equity that can be redeployed into the right asset. The house-and-land buyer can hold, improve the property, and wait for the suburb's demographics to mature. Even the failed developer can rebuild if they have the discipline to start small and the humility to get proper advice.

What all of them needed was someone willing to tell them the uncomfortable truth about their current position and provide a realistic path forward. That is what we do. Our 350-plus portfolio is built entirely on houses with 80 per cent land ratios in supply-constrained suburbs. Average rent $709 per week. Average growth 15.7 per cent annually. These numbers exist because we refuse to put clients into assets we would not buy ourselves.

## References

1. [CoreLogic Australia, 'Houses vs Units — 10-Year Capital Growth Comparison, Melbourne', December 2020.](https://www.corelogic.com.au/research)
2. [Australian Taxation Office, 'GST and the Margin Scheme — Residential Property', 2020.](https://www.ato.gov.au/business/gst/in-detail/your-industry/property/gst-and-the-margin-scheme/)
3. [PremiumRea portfolio data, December 2020. 350+ properties, average rent $709/week, average growth 15.7%.](#)
4. [Strata Community Association, 'Average Body Corporate Fees — Melbourne Metropolitan', Annual Report 2020.](#)
5. [REIV, 'Annual Median Unit vs House Prices — Melbourne', 2020.](https://reiv.com.au/property-data/residential-median-prices)
6. [Australian Bureau of Statistics, 'Building Approvals — Melbourne Growth Areas vs Established Suburbs', Cat. No. 8731.0, November 2020.](https://www.abs.gov.au/statistics/industry/building-and-construction/building-approvals-australia)
7. [Reserve Bank of Australia, 'Financial Stability Review — Household Balance Sheet Risks', October 2020.](https://www.rba.gov.au/publications/fsr/2020/oct/)
8. [Urban Development Institute of Australia, 'New Land Lot Releases — Melbourne Metropolitan', 2020.](https://www.udia.com.au)
9. [Domain Group, 'Melbourne Apartment Market Report — Price Growth Analysis', 2020.](https://www.domain.com.au/research/)
10. [Australian Securities and Investments Commission, 'Property Investment Risks — Consumer Warning', 2020.](https://moneysmart.gov.au/property-investment)
11. [Victorian Building Authority, 'Owner-Builder Permit Statistics — Common Development Failures', 2020.](https://www.vba.vic.gov.au)
12. [Master Builders Victoria, 'Construction Cost Index — Residential Building', Q4 2020.](https://www.mbav.com.au)

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Source: https://premiumrea.com.au/blog/three-worst-property-mistakes-destroying-migrant-wealth
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent