A little suprised there wasn't a thread on this already (unless I missed it).
Auctions were last night, only 3 out of 6 made profit, and only 1 made more than 3%. Although I couldn't help but note that the "break-even" point didn't seem to include buying/selling costs, so at least 1 if not 2 of those 'profitable' reno's wouldn't count as profitable in a real world scenario.
Now on one hand the properties were pre-purchased, so its not like the renovators got to do their own market research before buying, however one thing that struck me was the large gaps between what the RE agents were saying the market value was prior to auction, and the value the renovators thought their properties were worth. It seemed a lot of them had personal valuations based on hope rather than research.
I also noted the two most profitable renos were done by the chippies. Its probably obvious, but they likely were able to add more value for money because they could do more of the work themselves rather than with tradies.
So I dunno, were there good lessons to be learned from the show? Or was it just entertainment?
On a side-note, I felt sorry for the young bloke who bought the last house. He fairly obviously went well over his budget and was clearly carried away by the excitement of the moment.
I wasn't surprised myself that half of them didn't make any profit (although as you have mentioned above their definition of a profit is not accurate) – also didn;t count the cost of the swimming pool (as it was a prize).
I picked this one to win from the start mainly due to the fact that it was entry level housing price (eg more buyers, despite the location). Also as it was the cheapest house on the show it didn't have to make a lot of profit to win. They also added m2's to the house.
I was impressed by the quality of the renovations, however the result clearly demonstrates that you need to do your due diligence on any house when renovating for profit. In these times its when you "buy" that you make your money…… by getting an amazing bargain and renovating with a quick turnaround time if possible (dependant on your circumstances of course).
The road ahead is rocky, but I still feel there is money to be made for the smart investors.
Lessons to be learned:
1. Not all renos create a profit
2. Don’t disclose your costs on a nationwide tv marketing campaign
3. Don’t buy in a falling market & sell in the same market
4. Don’t believe the hype
5. The tv show won at the end of the day – sponsorship & advert revenue far outweighed the production costs, purchase/sales & holding charges so made a profit for the network & its sponsors.
6. Renos probably hid the fact that the asset values dropped during production & the works stemmed those losses.
7. It was a tv show based on things you wouldn’t do if they were your own $ eg sell without reserve equivalent to a distressed sale.Hi guys I agree with most of the above
they over capitilized, they paid top dollar for places that were clearly condemed, I wouldnt have paid a penny over the land value on most of the properties in there pre-reno state, also it goes to show its much harder it is to make a profit doing structural renos,
I believe the smart money for the average person looking to do a reno is to stick with cosmetic renos, buy a tired looking property undermarket value and not spending more than 10% (less if you can) of your purchase price on it, and if you look at what guys like Nathan Birch do you could spend even less..
They actually all lost money when you take into account the prizes they won, which weren’t included in the “profit” calculations.
Did they add stamp duty and interest costs to the cost??
Cheers,
LukeTotal entertainment and very unrealistic as it didn't take into account stamp duty, prizes won, selling fees, interest costs and loss of income from their day jobs while they were renovating. Therefore none of the houses made a profit. Hopefully channel 10 covered all these costs with advertising revenue it would have been a pretty expense production.
Cheers Maurice
It was a supposed 25m investment… I don’t believe they made a return, which is why they’re considering canning the program. The production was not so strategic…why publicize buying costs and material costs, then have some D grade audience attend an auction when they’re not even legitimate buyers? Word of advice to the producers of the block & renovators, don’t release figures to the public… especially in this country, you won’t make a buck!
Channel 10 would have made good money I think- the advertising revenue generated would have been huge. Also, the in program advertising such as the contestants saying 'Wow, my high quality and reasonably priced LG electronics have arrived, I am so excited!!!' would have been a big cash cow for Channel 10.
The point of this thread is discussing whether the properties themselves made money as investments, and what mistakes that contestants made. Channel 10 made money, it was probably a cheap program to make with lots of advertising revenue.
As far as investing goes, I think the big mistake made by the contestants was not purchasing the properties at a good price (which to be fair isn't their fault), they over capilitlised (I think I saw they were spening $130k renovating a $400k property!!!!!) and renovating with emotion not to the target market.
Any one elses thoughts???
Cheers,
LukeI see your point Luke but ‘ them’s the roolz of da game’.
The alternative would have been demolition of the fibro & 60’s houses & have two new builds, the budget wouldn’t allow it, quality of the end product wouldn’t be there either. In a falling market, would these options have protected the ‘renovators’ any better?
Anyone else think it was generous of channel 10 rounding the prize to $100,000? I just thought why bother…….
I wonder what the other 5 contestants who went to auction really thought of the process. The show was so flawed, eg 24 becomes 6 who take their houses to auction, but only one keeps the so called profits……… I'm assuming the contestants were paid min wage during their time on the show; but to come out with nothing else. At least on the block they had a fair chance of getting something…… (or at least 3 of them did).
Anyway interesting….
For a lot of the final show I really wondered how they'd handle a total profit of only around $10k. After months of contestants talking about how winning the show would be "life changing". And no, I don't imagine the other contestants got paid anything, it was a competition, the risk was to spend all that time and walk away with nothing.
For all the talk by property guru's about the strength of the Sydney market right now, there was an awful lot of discussion about how tough the market is during the finale.
Scott No Mates wrote:I see your point Luke but ' them's the roolz of da game'. The alternative would have been demolition of the fibro & 60's houses & have two new builds, the budget wouldn't allow it, quality of the end product wouldn't be there either. In a falling market, would these options have protected the 'renovators' any better?They are the rules of the game, and I suppose it shows it is just that – A game. And I do agree, it would be pretty much impossible to make money renovating anything in this current market.
Watching the finale l thought wouldn't it have been a more interesting show if they had bought 6 houses where you could build a unit in the backyard. Have a budget for the unit and a budget for a cosmetic reno to the existing house.
Cheers Maurice
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