“The Block” build up failed to deliver

“The Block” build up failed to deliver

For “The Block” enthusiasts, Sunday night’s finale was a flop with only one of the four properties selling under the hammer. Instead of popping bottles of champagne contestants were crying on each other’s shoulders. The program highlighted some important points and plenty of warnings that would be renovators should pay attention to as it goes to show that renovating and making a profit is not easy to do, even with significant resources and support.

Firstly, and most importantly, you have to buy well. Based on the purchase price paid that clearly didn't happen and I am not sure the producers really had that high on the priority list as they were most likely more interested in having four properties close together. An article from The Australian stated that the properties were bought for $3.6million – an average of $900,000 per property. Stamp duty was listed at $180,000 with the renovations costing $400,000. So before the properties hit the market they owed Channel Nine an average of more than a million dollars per property before any type of profit could truly be calculated. (Let’s not forget here that these renovation costs don’t include the cost of labour provided by the contestants as part of the competition).

You then need to buy not just in a good suburb but in the better part of it. I don't know the Melbourne market that well however I have seen a few comments from fellow buyers agents who are in the know that have said "great suburb but they weren't in best part of the suburb". That’s mistake number two.

The property also needs plenty of potential to manufacture some good capital value - check they got that one right as they did start from scratch.

Next you need to renovate to your target market – I’m not so sure they did that very well maybe half right at best.

Rule number five, stick to an appropriate budget based on purchase price and end value so you can make a profit. Whilst the contestants had a budget to stick to it didn’t take into account the actual purchase price and associated costs. After all the highest reserve for any of the properties was $950,000 – well below the cost of purchase and renovation. With all other reserves ranging in the $800,000s it means they were prepared to sell all four properties for a loss.

In summary, if you don't do all of the above well then you won’t make a profit. Renovating is not as easy as it looks and this year’s The Block provided a good example of how if you don't get all of the above points right then you're not going to make a profit.

Categories: Renovations