Why Buy and Hold Property is Failing Average Aussies

https://www.youtube.com/watch?v=S8rWAdGSi4I

Let me tell you something that’s making a lot of Australians quietly frustrated.

For the last 30 or 40 years, everyone has been told the same thing about property:

Just buy a house… hold it… and wait.

And eventually you’ll get ahead.

But here’s the problem.

That strategy worked brilliantly for the previous generation.

For the average Aussie today, property investing Australia wide has become much harder to scale.

So, in this articler I want to break down why buy and hold property used to work so well, why it’s getting harder now, and what smart proeprty investors are doing instead.

Because the game hasn’t stopped working.

But the rules have definitely changed.

Alright.

First things first.

This is not an anti property article.

Property is still one of the best wealth building opportunities in Australia.

And buying and holding property has created enormous wealth for a lot of people.

I speak to investors every day who built great portfolios doing exactly that.

But here’s the key point.

They built those portfolios in a completely different environment.

If you want to understand why people feel stuck today, you need to understand how different things were.

Why Buy and Hold Property Worked So Well Before

If we go back a few decades, the numbers were very different.

Property prices were much lower compared to what people were earning.

So people could afford to buy multiple properties over time.

Lending was also easier.

Banks were more flexible and there were fewer restrictions around borrowing.

That meant if you had a stable job and your property had gone up in value a bit, you could often borrow against that increase and keep adding properties to your portfolio.

Then you had strong population growth.

Cities were expanding. Property values kept climbing over the long term.

So the strategy was simple.

Buy a property.

Hold it.

Let time and the market do the work.

And eventually the property grows in value, giving you what’s called equity. This is basically the extra value sitting in the property which you can then use to roll into your next deal.

Do that a few times and suddenly you’ve got a solid portfolio.

And that formula worked extremely well for decades.

What’s Changed

Now let’s fast forward to today.

This is where things get tougher for the average person.

The first thing I want to talk about is entry prices.

Property is significantly more expensive relative to income than it used to be.

So getting into the market now often requires a much bigger financial commitment.

And because of that, people are often pushed further away from major city centres just to afford something.

Which can slow down how quickly property values rise over time. This is what investors call capital growth.

Then there are lending restrictions.

Borrowing money today is much harder than it was years ago.

Banks now look very closely at something called serviceability. This simply means how confident they are that you can afford to repay the loan.

So they go through your income, your expenses, and your existing debts much more carefully than they used to.

Which means buying multiple properties has become far more difficult.

Then you’ve got holding costs.

That’s the ongoing cost of owning the property while you’re holding it.

Things like the interest on your loan, which is basically the price you pay the bank for borrowing the money.

Then there’s land tax, which in some cases investors have to pay each year depending on how much property they own.

You’ve also got insurance, which protects the property if something goes wrong.

And then there’s maintenance, which is simply the cost of fixing things as the property ages. Things like heaters breaking, hot water systems failing, or repairs from normal wear and tear.

And when you add all of those costs together, they can really start to reduce the profit you make from the property.

And here’s another big one people don’t talk about enough.

When you buy a property, you actually start behind the eight ball in terms of what you paid versus what the property is worth.

And that’s because of all the extra costs involved in buying it.

For example, there’s stamp duty, which is a government tax you have to pay when you purchase property.

Then there are legal fees, which pay the conveyancer or lawyer who handles the paperwork and makes sure the ownership transfers correctly.

You also have adjustments, which are things like council rates or water bills that get split between the buyer and seller at settlement.

These are all standard costs that come with buying property.

And by the time everything is done, you might be six to eight percent down from day one of owning the property.

So now you’re sitting there waiting for the market to grow just to break even.

And then it needs to grow even more before you actually start getting ahead.

Which means the market has to do a lot of the work.

And that’s why a lot of Australians feel stuck.

They’re holding property and waiting and hoping.

The Shift That’s Happening

Now this is where things get interesting.

Because more and more investors are starting to shift their approach.

Instead of just buying property and waiting for it to go up in value.

They’re creating the value themselves.

This is what we call an active property strategy.

Instead of relying completely on the market, you create extra value in the property through improvements or development.

You buy a property.

Then you improve it in some way.

For example, you might do a knockdown rebuild, which is where you buy an older house, demolish it, and build a brand new one in its place.

You might add another home on the block, sometimes called a dual occupancy, where one property becomes two homes.

In some cases, you might turn one property into three or even four homes, like a small townhouse development.

You could also subdivide the land, which means splitting one block into smaller blocks that can each have their own home. From there you can build on them, or sell the blocks separately.

Or you might add something like a granny flat, which is a small second home on the same block that you can rent out to create another income stream.

The goal is simple.

You increase the value of the property through smart planning and development.

So when the project is finished, you’ve already created equity. This means the property is now worth more than what you spent to buy and improve it.

Which means you’re ahead of the game immediately.

Instead of waiting years for the market to catch up.

And quickly, if you’re interested in property development, you can join our free property developer network, the Little Fish Network. There are thousands of investors inside sharing knowledge, real projects, and helping each other win every day.

Why This Changes Everything

When you build in equity, the entire equation changes.

You’re not starting six or eight percent behind. You’re starting in front.

And you’re also improving the quality of the property you end up holding.

For example.

If you develop the site or build new property, you end up with a brand new home or homes.

Which usually means lower maintenance costs and a property that’s more attractive to renters.

So there are often fewer surprise costs early on.

Compare that to holding an older property for decades and all the things that can go wrong over time.

Heaters break.

Hot water systems fail.

Roofs leak.

And all those small repairs slowly eat into the money you’re making from the property.

So if you’re someone renting the property out, newer homes are often much easier to own and manage.

The Real Advantage

But the real advantage is the options it gives you.

When you develop or improve a property like this, you can often turn one property into multiple homes.

Instead of owning one house on one block of land.

You might finish with two homes.

Or three.

Or even four.

Which gives you far more flexibility.

You could rent them all out.

You might sell one and keep the others.

Or you could sell them all, take the money you made, and use it to move into your next project.

And here’s the big kicker.

You created those additional homes without having to pay stamp duty again.

Remember, stamp duty is the government tax you have to pay when you buy a property.

So if you were buying multiple properties through a traditional buy and hold strategy, you would have to pay that tax every single time you purchase one.

And that tax alone can cost tens of thousands of dollars every time you buy, which makes it much harder to keep building your property portfolio.

The Reality Today

So let me be clear.

Buying property and holding it for the long term still works.

Over long enough timeframes, property prices generally rise.

But relying on that strategy alone today can be slow.

And for the average Australian trying to build wealth, time matters.

That’s why we’re seeing more investors shift toward strategies that create value in the property instead of just waiting for the market to do it.

They still benefit from long term growth.

But now that growth becomes a bonus.

Not the entire plan.

So if you’ve ever felt like property investing today seems harder than it used to be.

You’re not imagining it.

The environment really has changed.

Property prices are higher compared to what people earn.

Borrowing money from banks is harder because they now check much more carefully whether you can afford to repay the loan.

And the ongoing costs of owning property such as interest on your loan, land tax, insurance, and maintenance have all increased as well.

Which means the old buy it and forget about it strategy is much harder to scale today. In many cases, this is exactly why property development fails for investors who rely purely on market growth without understanding how to manufacture equity or improve a site strategically.

But the opportunity hasn’t disappeared.

It’s just shifted.

The investors getting ahead today aren’t just waiting for property prices to rise over time.

They’re improving properties and developing land so they can increase the value themselves.

And when you understand how to do that.

Property investing becomes something you can actively grow instead of something you’re simply waiting on.

If you’re interested in property development and want to go deeper, there are a couple of ways we can help.

First, if you haven’t already, you can join our free property developer network, the Little Fish Network.

It’s a community of thousands of property developers sharing knowledge and experience and helping each other succeed in property development.

If you want more direct help, I also offer one on one property development mentoring, and my team runs end to end residential development management for development projects.

If you’d like to talk through your project, you can book a call with me and we can figure out the best path for you.

Filled under: All Property Investment