What is two years of your time worth?

[journeyman Mick]

I might be missing something here, but I just saw a snippet of "Hot Property" this evening and don't understand the mentality behind some of the renovators. There were two couples (sisters and their husbands) who had bought an investment property and had just spent the last two years working on it, presumably most of their weekends. This had meant little quality time for their families and a bit of friction now and then. After all the money and time they had invested it was envisaged they should get about $50K for their endeavours.
$50K / 2years/4people = $6,250 ea per year or about $10 per hour each assuming they spent 12 hours per week on it each. This is on top of a financial investment (property and improvements) of around $400K. And presumably, as it's an investment property there would be capital gains tax payable also.
I don't know about any one else but if someone approached me and said "look, I want you to lend me about $100K and work for me about 12 hours of every weekend for the next two years, I'll pay you $10 per hour but you won't get the money till the two years are over, which is when I'll give you your money back as well, how's that for a good investment deal?" I'd tell them where to shove it! :eek:
Unless there's something I've overlooked it seems to me that these people would have been beter off banking their money and getting a part time job at Macdonalds flipping burgers.
Am I missing something here? :confused:

Mick (who'd want at least 5 times that per hour to give up part of his weekend, to be paid at the end of the day, thank you very much! )

[gemi_babe]

Put that way Mick it seems mad.

I'm slowly doing up my place but I don't intend for it to take 2 years. I have given myself till next winter when its all fixed up/insulated-walls/floors done etc.

Slow and steady wins the race for me.

[TassieKiwi]

We've done it twice - once without,, and the second time a MAJOR reno with children. I would have to agree with Mick, that it is just not worth it. We missed out on weddings, family gatherings, 40th's- and I have a strong regret that I missed out on my daughter's first 18 months of life. The day she came home at 2 days old, I had to get outside and finish the deck. It didn't end there.


Sure, we walked away with $120k that we didn't have before. Plenty of people in the same area did as well or better, and all they did is paint the bloody house!:mad:

There were positives; achievement, accolades, getting the highest price ever in the street after buying the cheapest house.

THere is a better way of spending your life, for sure.

[silentC]

Agree 100% having done it myself. Same story as you TassieKiwi. Both kids were born while the renos were going on. Spent just about every weekend working on it and most afternoons too. When we sold, we had doubled our money on the original purchase but the reno would have taken at least half of that.

In addition to the loss of free time and time spent with the family, I think there's also a hidden cost that may only be revealed in years to come. When you start pulling out walls and ceilings, I think you expose yourself and your family to a lot of nasties. Even if you wear the right gear, it still floats around in the air and settles on everything in the house. We're talking lead, asbestos and god knows what else.

I think these shows are pushing people into doing the reno in the hope that they can make a quick buck. The only people who really make money are the suppliers, the licensed trades, and the TV stations.

[Slavo]

And dont forget costs such as stamp duty, real estate agent fees, inflation (for every $100,000 invested 2 years ago, at a CPI of 3%, that is the equivalent of $106,090)

[himzol]

Mick,

I have to agree with you about the people you mentioned. I didn't see the show as I was spending some quality time with my Jointer and thicknesser . There are situations where doing the reno yourself does pay off however, I have a friend who is turning forty today. About ten years ago he and his partner baught an old pressed iron fronted cottage for the price of the land alone.

My first impressions of it were, "OK when do the bulldozers arrive".
Anyway after practicaly rebuilding the place. I think the roof is original and the floor boards in the first two rooms. It took them five years working weekends, afterwork till odd hours of the day. They did squeeze in a holiday to Europe and one to Vietnam and Malaysia as well in that time.

They now own the house freehold, and are looking to buy a nice retirement property (at forty). I guess what I'm saying is that it can pay off, but not if you are out to make a quick dollar.

Himzo.

[jackiew]

I am baffled at some of the new investment properties that are being bought here in Melbourne. You see the selling price. You see the rent that is advertised.

Whichever way you do the sums whether you assume a 100% mortgage or a 20% deposit down or 100% down ... build in a very optimistic capital growth, no vacancies, lowest management fees, super careful tenants who require no maintenance work done.

At the end of 5 years I could not get the returns to be better than they would have got stuffing the money under their mattress. And this assumes that everything goes good. Add in a redundancy ( no income but the outgoings still exist), a couple of months vacancy, careless tenants etc and things look decidedly black. You have to ask yourself why people are buying some of these properties. They can't all be money laundering.

[craigb]

Plenty of people in the same area did as well or better, and all they did is paint the bloody house!:mad:

There's the rub when it comes to making money out of investment properties I reckon.
You have to buy at the bottom of the market, do a spruce up for minimal outlay and sell at the top of the market.
In the meantime having it rented out.

It's easier said than done though.

Have to agree with Mick though, for that sort of return it definitely is not worth he hassle.

[Wood Borer]

If it is viewed from purely a financial perspective then it is a waste of time.

If you get your kicks out of building and renovating then it could be viewed as being paid to have fun.

Mick being a builder probably doesn't see building as a leisure activity. Not many people have their hobby as a full time job paying well. If you do, you are lucky.

The only people who really make money are the suppliers, the licensed trades, and the TV stations.

Silent, you forgot the banks and the real estate agents and the government taxes.

People brag about the high price they paid for their house. Really something to brag about since you will need to borrow more, pay more stamp duty, pay higher insurance ...... seems the advantage goes to everyone but them!

But it does support the old saying about fools and their money.

[reeves]

Damn, and just when i was starting to crumble to my wife's directions and thinking of renovating the place, now you have all concvinced me of what i already know, it's a time consuming pain in the ****.

I will now give up thought of such renovating ideals and just spend my time and money fixing the odd broken bit, ignoring the garden, doing some woodwork for pleasure and being innvolved in my son growing up...

thanks for setting me on the straight and narrow !

now, to get some common sense past the wife..

;-)

[barnsey]

Guess we've all had some experiences we'd like to forget

Bought the house in Brunswick, close to the tram, schools and the local footy ground (Go Bombers)

Renoed the front love room and decided that this house needed more space. Brought in the Archicentre's recommended architect and set about designing our new "House & Garden" display home. Got all that approved and called for submissions from builders.

The builder provided referees that all confirmed his ability to perform and he was duly selected.

There were a litany of f&%# ups, including one that meant the built in pantry for the new jarrah and brushbox kitchen was reduced in width by a meter coz they put the window in the wrong place!!! :eek: :eek:

However the specially commisioned stained glass windows, polished floors etc gave the place a quality that really was front page stuff. In the process the missus and I were fighting as to who was going to tear the builder apart 1st.

Needless to say - she's still in the house - I got F@#k all for the effort and you guys are trying to convince ME it's a waste

Pleeeease

Must admit the pleasure in seeing a classic home extended and turned into a well preserved home accomodating a modern family was a buzz

Guess that's how the cookie crumbles


Jamie

[Grunt]

I wouldn't get in to the property investment market now because I don't think there is any growth left in the market. Most people can't afford to buy the house that they live in.

However, if you had managed to buy a house or land between 8 and and 2 years ago it would be really hard not to have made money. The median house price in Brunswick (Vic) in 1996 was $140,000 and now it is $400,000. That's around 15% return without taking into account rental income.


The people in Mick's story would have been better off buying a place in 2002 in Brunswick for around $325,000 and to have sold it this year for $400,000 without doing anything at all.

[PaulS]

Let me play the devils advocate, and say that maybe these people enjoy doing up houses, and the money is an added bonus?
Or to put it another way, they enjoy the journey as much as the destination...

[barnsey]

Thanks Grunt - I really needed to know that.

And Reeves -

There is nothing so uncommon as common sense.
And as I see it men's & women's definitions are entirely different

Good luck pal

Jamie

[Optimark]

Property is always a long term thing. That is, if you wish to realise some capital gain over and above your expenses.

The house next door to us has changed hands 5 times in the 17½ years we have been here. It's up for auction in 2 Saturdays time.

It has been interesting to watch the owners using different methods to realise a gain, over and above inflation.

For comparison we paid 93½K for our 2 bedroom brick veneer. The house next door is a 2½ (don't ask) bedroom weatherboard.

Three years after moving in the house was sold as is and needing paint for 128K.

The new owners were a young couple and their respective inlaws were onhand to help with renovations. They were in the house for a couple of years during which they replaced a good percentage of rotten weatherboards, fiddled with the roof structure to lift and straighten the roofline, re-stumped, re-wired, re-plumbed and the final addition was a home made front fence. The fence was a ripper and took them two whole months of evening and weekend work. They borrowed my triton to crosscut the palings to length. In short the work and money they put in was substantial, their aim was to have a family and live long term. Twas not to be, hubby got a job offer in the USA and the left and sold at auction for 145K. Basically we reasoned that they ran a real loss although their actual bank balance was more or less equal.

Next, was another young couple and they really didn't have to do much as it was all done for them. They lived in the house for 5 years and after the second child, decided it was too small for their growth plans. They added a cheap kitchen from a kitchen company costing them about 5K and sold the property at auction for 245K. They really did make some money in my opinion.

The next owners were a 30's something couple with two small children, they were only interested in living in the place for 1 year and then onselling so that they could go upmarket, This they did and 15 months after moving in they sold at auction for 278K, after deducting taxes etc, we believed them to have lost at worst and to have just broke even at best.

The house was then let out to a German couple who had moved to Oz and they stayed until they had enough money to purchase their own place. This took a couple of years and when they moved out the owner decided to sell. It went to auction and sold for 305K. As the owner didn't do anything at all to the property he/she probably didn't really lose or win in that instance.

The current owners in their late 20's no children have been there for a few years and recently, started sprucing up the place. It was put up for sale 3 weeks ago. He is a plumber and finally the achilles heel of this property, the bathroom, is perfect, as it should with his occupation. They want 470K for it but I think a realistic figure is about 450K. If they attain the lower figure they are well ahead and if they get the higher figure then they should invest in a bottle of bubbly.

As a comparison, we have spent about 125K on our house and require another 12K for our bathroom and garage. Conservatively, we and estate agents, estimate it could fetch 550K for a total outlay of 230½K. With those figures we are ahead of inflation and expenses/taxes by a fair margin, but, and I think it's a fair but. The time we have held the property has had more influence than almost anything else in the equation!

Mick.