Want some insider info on The Block.. straight from one of the agents, a mate of mine, who sold one of the houses.
I know this guy well, he manages a few of my properties.
Anyway….
He reckons the production company that bought the site for $3.8 million paid at least $1 million over the odds.
They couldn't give a rip, they made around $30-$40 million on the series by selling it to Channel Nine… So mathematics and shrewd investment never came into the equation.
Here's what's really interesting…
After costs, each individual house owed them $1.7 million. I think the highest price achieved at the auction was just over $1.6 million. The numbers are seriously out of whack, here's why…
The average purchase price for each house was $950,000… Plus around $45,000 in stamp duty, so let's round it up to $1 million.
Before the contestants got the properties, the production company basically rebuilt the guts of the properties and spent about $400,000 – $500,000 per house on structural works.
Yep, hard to believe, but that's what my insider tells me. The production company couldn't care less about a great deal, they wanted to do it fast and price was not a barrier. They paid over the odds to get the houses prepped for the show.
…that part of the series ended up on the cutting-room floor, never to see daylight.
The contestants had a budget of around $200,000 – $250,000 each for the reno.
So, all up, like we said earlier, about $1.6 – $1.7 million.
On the surface, the result looked bloody amazing, but as they say in the classics, don't try this at home without supervision.
Brad and Lara, thank your lucky stars.
The other interesting point that my insider-agent told me, and this is public knowledge anyway, they set the reserves at around $1 million.
Why did they set them so low, considering how much they'd spent?
Again, no investment logic here. The sole explanation for this was probably the fact that they got such a bad result with the Richmond Block last year. The only thing they could attribute to the poor results to was setting unrealistic reserves.
Now the question is, can you make this sort of money from doing the same in real estate?
I asked the question to the insider…
“Can I buy single-front house in and around Dorcas St. South Melbourne for around $750,000, spend $250,000 on renos and sell it for at least $1.3 million?”
He said, “Yes, if you've got a reality tv-show behind you.”
So, you get the drift.
The other interesting goss' is that my insider-agent friend has had lots of calls in the last couple of days from people wanting to list their house on the market after the result.
…and all of them asking for big dollars.
The thinking is, “If that house sold for THAT much, my house must be worth a lot more…”
He's had to disappoint a few folks.
…but you know agents in the Melbourne winter, where the property market typically goes to sleep… They're happy to take any call they get.
Look, it sounds like I'm being negative on property investing. I'm not really, it's just that The Block had a totally different agenda. Nothing to do with real estate and everything to do with the business-model of television.
Let's not get the two mixed up.
On a brighter note, and a more realistic one, there are ways for you to make money by getting in at wholesale (or creating it by adding value).
If you want to find out how the professionals do it and get a realistic 20-25% boost in growth, then forget about The Block, this is the event for you:
The Lazy Developer Seminar
http://fiftyfreeseats.com/bob
It's run by a guy called, Bob Andersen.
No fudged numbers, here are his results for the first half of 2012:
- In January, he settled on 6 townhouses with a profit of $780,000.
- In March, he completed 15 units with a profit of $1,980,000.
- In April, 10 houses, profit of $850,000.
No reality-tv show required, no glitz, no glamour… Just real concepts, real numbers, a system to follow with real results at the end of it.
Hope you enjoyed this, get along to Bob's event if you're serious about real estate.
Signed with Success,
Jon Giaan
Knowledge Source
P.S. If you've got an opinion on this – post your comment below.
Prue says
Hiya, That was interesting to hear a little more info on the business of the block. I never thought it was about the original investors making any money on the sale of the properties and am not surprised to to hear of the earnings from TV land. Great show, got some terrific renovation ideas and really enjoyed the dynamics of the personalities. Looking forward to the nest one.
Steve says
I agree with Prue’s comments.
In reality you would have to be a bit concerned to think that the shows only goal was to make a profit on the houses. Hey it is “REALITY” TV and investing in property and making a buck takes time and education (IMO).
Steve
Gerald Winston says
Woa there Jon, U R on the money, and the ‘Reality ‘ is – ‘Don’t let the truth get in the way of a good story’ TV sucks em in again!
Garry says
Great result ,,,after last years,,,,its,a a TV SHOW,, the issues of breaking OH&S LAWS,,,,LICENCE,,LAW,S REAL BUILDES DON,T BREAK THEM,,,,,,I MEAN 70 TRADES IN ONE HOME,,,,,,,,REALITY!!!!
andy says
Hmmmmm, it was obvious. Here’s a funny story, a local real estate agent told me, it’s great news about the block, market must be moving!!!! A great sign for Melbourne. I’m booking in to get a place on the block, and all i have to do is be mean to my partner and the ratings go up. That’s a simple maths equation for making money. Great news for the contestants in gaining a windfall and the show was great to watch for gaining ideas. Sad news for all The Melbourne sellers at the present moment.
NATH says
So what came of the house behind the block?
Timbo says
Thanks for the insider goss. Now I’m not a builder, but I’d have to question the $400-500K spent on each property in structural works behind the scenes. . . I mean really . . . you can build a whole house for less than that . . . just being devils advocate and questioning your numbers . . . seems you might be pushing another barrow with links to a developers seminar . . .
Tony says
I was curious about the result ($1.7M prize money to the 4 contestants), I am even more curious about the bidding ….. Yeah, great TV, fun to watch, but reality???? My own personal favourite of all the characters was the villain … the dick head builder Keith. How much did he walk away with?
DiG says
TV entertainment- yes, decorating ideas-yes, contestant burnout-yes (lucky they earnt some money this year), longevity of the finished product – dubious. How can so many trades people be working over the top of one another and do a ‘proper’ or even a decent job. I bet there were some exceptional expletives off-screen! Reality it is not. I bet there is a lot of unnecessary waste as well. The novelty is wearing off on me.