I was out in Melbourne the other weekend at a bar in South Yarra & after a few drinks I was having a conversation with a writer from the UK. He is a couple of months off getting his book published and I can’t for the life of me remember his name to unfortunately quote him in this blog. He was an eccentric character as most writers usually are. He begun to tell me his theory on life – I felt obligated to listen to the self involved conversation as he was one of those personalities that you felt like you couldn’t escape. His comment was “Life is like an orange juice maker, you put that many bloody oranges in to only get a measly quarter of a cup” = you put that much effort into life to get little in return. I immediately thought it was a little cynical - if i was talking to the pom after the first test of the ashes he may've been a little more optimistic. (For the record if anyone reads a book and this analysis is in chapter 2, this is the guy I was talking to)
The next day I compared it to Real Estate and found there are a few mistakes which people commonly make that creates a situation where they put all those oranges in the juice maker only to receive a quarter of a cup.
Number 1 Mistake: Over capitalizing
The neighbor’s houses and the presentation of the area have considerable influence on the value of homes in the area. Before buying or building it is important to consider the housing styles, demographics of your neighborhood, and sale prices of other homes in the area that have recently sold.
The decision to buy, build or renovate a new home is not one to be taken lightly. It is recommended that you think through every aspect of the project prior to getting started. Seek the advice of a local real estate professional if necessary to determine how the proposed renovations will affect the value of your home.
A general rule-of-thumb for remodeling is to make sure that you don't over-improve your home for the neighborhood. From an investment position it's not a good idea, to improve your home to the point that it's best house on the block.
Number 2 Mistake: Renovating
Renovation is more expensive then what people think – working on older homes to restore it to it’s original condition is a very expensive process. Interior and exterior cracking is usually commonly found in older homes which can generally mean some issues with the foundation. Re-stumping is a costly job that older homes usually need to have redone. Electrical work is another major issue considering that there are new compliances that electricians need to follow. Re-wiring a home can also be a costly job & the chances are the more you dig around beneath the surface the more work you will find – which in turn means more costs
Common issues are:
Roof
Stumps
Rewiring and replumbing
Shower recesses
Pest (particularly white ant) damage
The costly exercise of renovating your home may not reap the rewards at the end when you need to re-sell
Number 3 Mistake: Building/Buying your dream home
Do not buy or build your dream home. You should always take emotion out of buying a home. Ask anyone who has bought and sold and I am sure they have made this mistake.
I know I have. I built a home & it was, I thought, ideal family home – 4bedrooms, 1, study, 2 bathrooms, ONLY 1 LIVING AREA. I never found only having one living area an issue when I was living in the home, after all there was only two people living there – myself and my brother. However a problem arose when my brother moved to Melbourne and we put the house on the market. Everything was built perfectly for a family yet we compromised on a living area because at the time we didn’t need it. If you put your emotions into buying or building I guarantee you will be short changed at the other end. It proved a costly mistake The truth is very few people live in the one home all their lives.
So now what I would say to the pom after pondering his quote on life – is you can get out what you put in – add water to the juice maker or simply thoroughly research every property investment you make. Everyone wants to get out of it what they put in or more!
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