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.
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
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,
P.S. If you’ve got an opinion on this – post your comment below.