Barefoot Investor: renters win, seller loses $210k in Docklands disaster

Not everyone is making a killing on property says Scott Pape, noting some inner city suburbs are struggling with one seller having to cut $210k off the price they paid 10 years ago.

Scott Pape is The Barefoot Investor. Picture: Jason Edwards

You always hear some real estate rooster crowing about how smart they were when they bought a joint in 2018 for $480,000, and then flipped it three years later for $1.3 million.

Renters hate those guys.

So, just for kicks, let’s look at life on the other side of the ledger.

Specifically, an apartment in 883 Collins Street, Melbourne, that’s just been put under offer this week.

Our story starts around 10 years ago, in 2015: You’re sitting on the couch watching this new show called Married At First Sight, while simultaneously doom scrolling on realestate.com.au, when you see a sexy inner city property with the headline:

“Waterfront Elegance Meets Modern Convenience.”

Tap.

It’s a brand-new, waterfront, two-bedroom, two-bathroom, one-carpark luxury apartment in Melbourne’s Docklands. The building is like a resort. It has an indoor heated pool, state-of-the-art gym, yoga room, and even a residents’ lounge.

“Ooh, fancy”, as my mother would say.

The real estate agent assures you it will have strong rental returns, and touts the stamp duty and depreciation benefits of buying a new build off the plan. So you pony up and purchase the apartment for $860,000.

Cut to today.

Nearly 10 years have passed since you purchased the property … has it been a good buy?

Well, luckily for you, it’s been a pretty good 10 years to own a property:

For much of the past decade, interest rates have sat at some of the lowest levels in history.

Plus, we were hit with a fully fledged rental crisis in which landlords jacked their rents up, up, up.

Pool in the Collins St complex in Melbourne.

Okay, so what’s it worth today?

(Bearing in mind that 10 years ago you paid $860,000, so it would need to be worth at least $1.1 million just to keep up with inflation.)

Well, this apartment has sat for months on realestate.com.au under the headline “urgent sale”.

And last week it went ‘under offer’ … for a price guide of $630,000 to $650,000.

That’s a shocking $210,000 loss over 10 years.

Yet it gets worse.

That loss is before you factor in inflation, body corporate fees, council rates, land tax, maintenance, agent’s selling commission, and of course 10 years of interest on your loan.

Look, I have no idea who actually owns this particular property, or the full story behind it. Yet what I do know is this is not an isolated case. Research house CoreLogic has identified 65 areas (mainly in inner-city Sydney and Melbourne) where prices today are still below the record highs from the 2010s.

“Vendors are willing to sell at a loss … but buyers aren’t interested”, says CoreLogic.

Now, guess who the real winner is in our scenario?

It’s the renter!

They’ve enjoyed 10 years of downward dogging in the yoga room and paddling about in that fancy heated pool, plus they’ve even had a plumber on speed dial to unclog the dunny.

Now that is what you call “Waterfront Elegance Meets Modern Convenience”.

Tread Your Own Path!

My Heroin Junky Neighbours

Hi Scott,

The other day I was at my local playground pushing my kids on a swing while two blokes shot up heroin less than five metres from the gate entrance. This sort of behaviour is pretty common in my area (median house price is over $1 million). Actually, it’s pretty common everywhere these days. Did you know Australia has the highest use of meth per capita in the world?

We live in a zombie country where we are becoming desensitised to erratic crazy people. Well, we got a wake-up call last night. At about 7.30pm, I opened the electric gate just a smidge to take the dog to the park across the road. I came back 10 minutes later and found my wife hiding behind the couch. When she saw me she just broke out crying. A meth user had been banging on the front door, then entered through the gate and banged on the kitchen window. Thank god they turned around and left. The babies were asleep in the next room.

Do you have any advice on how the average Aussie can feel more secure in their homes, without breaking the bank? I’ve always been put off by security cameras, which need an electrician. We were very grateful for our landlord’s installing an electric gate last year. We just feel we need more in these crazy times.

Leo

If you are a renter, Barefoot Investor suggests moving to a suburb with fewer junkies and drug dealers.

Hey Leo

I have security cameras plastered around my farm.

Still, it doesn’t make me feel any safer … it just allows me to share video footage of foxes ripping the heads off my chickens with my Dad, who likes viewing these things. “Shame”, he says, nodding his head.

Leo, you’re renting, so just move to a safer suburb when your lease is up. Any increase in rent will be easily offset by not fearing for your family’s safety.

Oh, and one more thing.

The only people that like living around junkies are drug dealers, and I’m sure things really are as bad as you say. Still, your general comments about the state of the nation remind me a bit of the ‘old traveller fable’:

A traveller approached a wise man sitting at the edge of a village and asked him, “What are the people like in this village?”

To which the wise man responded, “What were the people like in the last village you visited?”

The traveller frowned. “Oh, they were selfish, rude, and drug addicts.”

The wise man nodded and said: “You’ll find the same kind of people here.”

In other words, what you look for you’ll see.

Good luck on the search for somewhere safer, and less paranoia-inducing.

An 11-Year-Old With a BIG Problem

Hi Scott,

I’m 11 years old and I’m trying to invest, but I’m having a problem. Every investing app I try has monthly fees up to $10 a month! Can you please help give me some advice on how to find the right investing app.

Emery

Scott Pape has advice for how youngsters can find the right investing app.

Hi Emery

Mate, this is a very impressive ‘problem’ for an 11-year-old to have!

Most kids your age are picking their noses or gambling on Roblox, but you’re not just considering investing, you’re asking the right questions too!

Yes, fees suck, especially when you’re only investing small amounts.

So, here’s what I want you to do:

First, figure out how much you plan on investing. Maybe it’s $100 to start with, then $50 a month.

Then I want you to google the following apps: Pearler Micro, Vanguard (accounts for kids), Raiz and CommSec Pocket, and work out how much each of these apps would cost in fees to invest in a high-growth shares option.

Finally, show your workings to your parents – I’m sure they’ll be impressed. Then ask them to cover your fees for the first year!

Remember, investing is like planting a little apple tree. You’re doing the hard work by planting it in good soil now, then you can sit back and watch it grow. Enjoy the apples. Spit out the pips.

Best Christmas Present Ever!

Scott,

Last year we got a Christmas gift that changed everything: The Barefoot Investor. And what a year it’s been. My 20-year-old son is now the proud owner of his first piece of land, having already paid off half the loan while keeping his emergency fund intact. My wife and I are about to take our second holiday, fully funded by our Smile account, and we’ve dramatically reduced our insurance costs. On top of that, we boosted our super by $30,000, ditched our credit cards, and wiped out every bit of other debt we had. Your book opened our eyes to the possibilities, and now we’re living a life we couldn’t have imagined. Thank you!

Mel

The Barefoot Investor by Scott Pape makes an ideal Christmas present.

Hi Mel

Wowsers, what a year you guys have had! You definitely deserve some eggnog this Christmas. It’s really cool that after all these years the book is still having a real and lasting impact on people. There are a lot of people doing it tough this Christmas, so hopefully they can follow your example and make 2025 their year.

DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.