Did you watch The Block Auctions? Did you see how disappointed the contestants were when their apartments failed to attain a premium price? The Block is reality TV and in reality the same scenario is played out every weekend across Australia, the difference is that it is not on national television for everyone to see.
If you are not upto speed with what happened then see here
Every day people buy property with the idea that they will renovate and sell at a massive profit. Shows like The Block often lull people into the false sense of security that it is an easy way to make money. In the last couple of seasons most of the couples have walked away with hundreds of thousands of dollars, all tax free. But The Block is a reality TV show where the contestants sign up for the chance to win $100,000 prize. Anything above the reserve price is simply a bonus. When you take big risks – signing up for The Block is a big risk – there is the chance of big rewards but it is just that, a chance. With Big risk there is also the chance of big looses, at least on The Block the contestants don’t have to pay for those looses with anything but their time (well and perhaps the invasion of their privacy).
Back to reality. The reality is that unless people know what they are doing it is very difficult to make massive profits from a renovate and sell strategy and unlike reality television when the expected sale price is not achieved, the costs come from your pocket. Buying and selling property is expensive and when these costs are taken into account together with the interest paid on any loan, the actual profits people make from such strategies are likely to be significantly less than many would have us believe.
The Block clearance rate was 100%; every apartment offered for sale, sold. Melbourne’s auction clearance rate has never been 100% meaning that some properties every weekend don’t achieve the expectations of their owners. A property is only worth what someone is willing to pay and increasingly it seems that people are often more willing to pay for a renovators delight which they can put their own style to than an already renovated property.
Like any investment strategy whether is it buy and hold, or renovate and sell seeking advice from experts should be your first step. Do your research and plan to the last detail. Add a buffer and if it doesn’t work on paper then it is unlikely to work in reality. Rembmer if it sounds too good to be true then it probably is.
Do I feel for The Block contestants? Of course. Do I feel for weekend warriors who make a lose? Of course I do, but there are only two certainties in life, death and taxes. Everything else requires that you weigh up the risk.
Thinks of buying a property, give me Margaret Godfrey Smartline Personal Mortgage Adviser a call on 02 4965 5865 and let me assist you to work out just how much the property will cost – obligation free of course!