What is two years of your time worth?

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. :D
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! ;) )

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.

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.

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.

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)

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 :rolleyes: . 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.

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.

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Originally Posted by TassieKiwi

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

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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.

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.

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Originally Posted by silentC

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

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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.

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..

;-)

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

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. :rolleyes:

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 :rolleyes:

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 :D

Guess that's how the cookie crumbles


Jamie

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.

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...

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 :o

Good luck pal

Jamie

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.

While I dither what to do with my house (see my dilemma in another thread :) ) I can just wait for everyone around me to spend heaps of money on their properties and bring the value of the street up. Providing I do basic maintenance I can't see how I can possibly lose out in the long run as the increase in value of their properties is going to drag mine up. Effectively I bought a block of land in a good area ( the house was free) and I'm fairly sure that they won't be making any more land locally :D

Definately the key to making money on a renovation ( if that is your intention ) is to buy in the right area and NOT to overcapitalise - back in the UK we watched lots of neighbours buy their council houses and turn them into little palaces. When it came to selling there was a reality check.

1. a percentage of homes in the street were still council houses the possible purchasers were put off by the possibility that they could find themselves living next door to the family from hell ( note I grew up in council housing and I'm NOT saying all council tenants are riff-raff ).

2. the council regulation paint schemes and redecoration schedule meant that the palaces were interleaved with extremely average looking homes - cars up on bricks in the front garden an added bonus.

3. the sellers expected to get their money back for "enhancements" that those not put off by 1 and 2 either didn't want or didn't think were worth what the renovator had spent.

That said there is nothing like seeing the results of your hard work - turning an ugly duckling into a swan. I do think that you've got to be hard headed about the financial aspects though. I've twice had to move for job reasons when I hadn't planned to so before investing in the gold bath taps it might be worth asking "do I really need to spend that much on taps".

If you are a couple renovating I think you have to both be in the same boat rowing in the same direction though. If one of the pair enjoys DIY and the other would rather eat worms than pick up a paint brush you're heading for strife.

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Originally Posted by Grunt

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.

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Yes, grasshopper.....then they have to buy in the same market. IF going to another bedroom, say $450-480K? Treadmill again.

THe real winners are the investment buyer/sellers, that don't have to sell the roof over their heads. They have made embarrasing amounts of dosh.

Luckily we bought in Tas before the sillyness,a nd the house is worth about $200k more. BUT - we'd be facing the same problem.

BTW - the folks that bought our flash reno on-sold it 12 months later,,,for $127k more. That is more than we made. They mowed the lawn; we half killed ourselves over 3 yrs. I try not to weep about this. Such is life.

Check out our results - was original 1940's stucco, run down:
http://www.open2view.com/Property/40...=226&offset=80

tassiekiwi, very nice job

just console yourself that you wouldn't want to pay the mortgage payments of either your buyers or their buyers.

I can see the sense in renovating the house you live in: sense of achievement, providing a better home for the family, and the possibility of possibly selling at a profit. The people on the TV though had bought the place as an investment, weren't living in it and as far as I could tell had no tenants. To all board members who are live in renovators - I'm glad I get to leave the building site at the end of the day, rather than come home to one! ;)

Mick

Thanks Jackie - we are proud of it, though my wife considers that time as the worst time in her life. Even I was reduced to tears of stress and frustration. You're right about the mortgage too - Ours was $1800/month just for the interest - this was less than the average mortgage in Auckland at the time. We couldn't afford to buy our own house!

Mick - you're right about living in the mess. With the babies, EVERY time you did a job, or usually part of a job, you had to clinically clean up before finishing. Collectively a lot of time.

Well the house next door went for auction today, it fetched 450K which means my estimate of 450 was spot on.

I know the owners wished/wanted 470K, but that was fantasy land.

The owner of the house directly opposite was offered 415K for his house 3 months ago, he wanted 440K and it's a brick veneer, compared to todays sold house, which is a weatherboard.

Buying and selling sure is weird!

Mick.

[QUOTE=journeyman Mick]
After all the money and time they had invested it was envisaged they should get about $50K for their endeavours.
[QUOTE]

Mick,

I saw this weeks follow up story and whilst claiming to have got $50K profit at auction they admitted that after taking into account interest paid over the period and selling costs etc. their profit was reduced to $20K.

However I am sure they failed to take into account the notional income foregone ( which they would have earned if they invested their moneys ) and capital gains tax or income tax.

So profit of $20K less taxes equals the income foregone.

So to answer your question the time they spent on the project, two years worth, was worth nothing. Not such a good use of their time.


Peter.

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Originally Posted by 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.

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Real estate is the best investment you could ever make but it takes a lot of thought before you enter the market. I agree with your comments about Melbourne. Sydney is the same. When there are a glut of properties on the market the prices are lower so everyone wants to buy one. Unfortunately, then there is a glut of rental properies and so rents are low and there are a lot of vacancies. You have to buy in an area where that sort of thing doesn't happen.
There's no 'right time' to invest in property because tomorrow is always too late. There's only 'the right place.' If you want to buy a rental property pick a place that has a shortage of rental accommodation. My rental property has had 3 changes of tennants in 5 years and the longest vacancy time was 2 days. That means that there is a queue of people looking for accommodation and you can pick and choose your tennants.
You are right about rental returns being poor though. After depreciation, maintenance and management fees the return is about 2% but anyone who buys a rental property isn't in it for the annual income. It's the capital gain that makes it the best investment.

Mick, ya dug up some LLLllllooooonnnnggg replies with this one. :D

Mate, look at it this way, (devil's advocate coming up here :rolleyes: )

I'm a computer tech, have been for 25 years now.
I'll be F'd if I'll buy an old computer, let alone contemplate doing it up... :eek:
unless someone was paying me about $88 an hour to do so. :cool:

To be fair to your "friends" "acquaintances" that you spoke of that made
about $6k each over a year, they made it from their hobby, not from their main job.

Can you make $6K a year & be happy with your results from your hobby?

I reckon I loose about $6k a year (not counting booze) on my hobby & I'm still happy with it. :D

Cliff,
I didn't watch the whole program, but it was hyping up how it was such a good investment and it was worth all their lost weekends etc as they were going to make some serious money out of it. I would've thought that if you wanted to renovate as a hobby, without any (or much) intention of making money out of it, that you'd work on your residence, at least that way you'd get to enjoy the fruits of your labours. Anyway, if they were happy to do it as a hobby, then great, but somehow I think that htey looked on it mainly as a money maker.

Mick

Some people supplement their income quite well by buying, renovating and then moving on.
I was talking to a young guy a few years ago and he said that he and his family had moved fourteen times, I think it was within Port Macquarie, in his twenty four years. His father would buy a dump, fix it up and then sell and move on to the next project. It sounds like he was a DIY junkie.
I don't think you can do that at the moment because any significant money you spend on a property will overcapitalise it.
Two of my neighbours had their houses on the market after extensive renovations and neither can sell. One of them had his house on the market about two years earlier and couldn't get the price he wanted so he took it off the market, put in a pool, did some major hard landscaping and major renovations on the house and then tried to sell again. Not the brightest lightbulb in the chandelier.

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Originally Posted by journeyman Mick

Cliff,
I didn't watch the whole program, but it was hyping up how it was such a good investment and it was worth all their lost weekends etc ..., but somehow I think that htey looked on it mainly as a money maker.

Mick

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I didn't see it at all, I agree that it's not much of a money maker when you
take up the labour content, if that's what they set out to do.

People ask me why I don't do woodturning professionaly.
....I make more money fixing computers.

I'd rather be woodturning...