Wry & Dry

When a headline property profit becomes a loss

W&D is not often given to penning a piece involving a sportsman, especially one from the Collingwood Football Club (the 'Magpies'). The Magpies, a deservedly detested tribal and inner-suburban club from the dodgy end of Melbourne, seems to have players whose off-field activities find their way into the media.

Hence W&D's reddened eye was drawn to a newspaper clipping that announced that a Magpies' player, apparently an ageing champion much given to exhibitions of his talent, was to sell his looxery home for $2.7m.

The drooling was that he had bought it for $2.5m just three years ago, and hence would make a cool $200 gorillas, tax-free.  Nice work, if you can get it?

Well, err, no.

W&D got out the scratch pad and pencil.  With $137,500 on purchase stamp duty; say $5,000 on legals; annual council rates of $5,777; 80% borrowed at 4%; 1.5% sales commission and $20,000 other selling costs this means an approximate total return of -3.3% p.a.   

W&D is puzzled, and it's before lunch.  W&D thought that there had been a property boom.

Either (a) the sales agent is under quoting (surely not possible); or (b) the player paid too much three years ago (well, after all, it's a player from ...oh, never mind).

And, yes, yes, W&D knows that there is an imputed-rental benefit.  But something still doesn't add up.