It’s always fun to watch a house transform from disaster to dream home, especially when it’s done in a 30-minute TV block. While you’re at home (sitting near one of your own unfinished projects), you see people take a home no one would live in and, with a little dust and elbow grease, produce a place anyone would happily call home.
But is it really that simple? Absolutely not.
Don’t let these shows guide your real estate investments. They may be fun to watch, but there’s a lot they fail to mention.
1. Major Money Comes From the Purchase
The investors on TV make the most money because they chose the right property to buy. Investors work on the front-end (before the footage) deciding which house to buy and what location brings the most return. Sure, a great kitchen renovation benefits the house, but it’s not the primary source of profit.
2. There’s a Lot They DON’T Show
Jobs that aren’t fun (or at least dramatic) don’t make the final cut. That means they don’t include the hours spent filling out separate city permits for each construction, electrical, plumbing, or mechanical aspect of the job.
Reports aren’t fun either. So the only time you hear about things like asbestos reports is when they use them to create tension in the plot line. In reality, there’s always time, energy, and money that goes into reports and permits.
3. Prices Are Relative
We all love a good deal, but just because you see a low-priced home on TV doesn’t mean it’s reasonable for your market. Some people go searching for something priced similarly in their area. This can’t be your guide. Other investors seek to buy a home in the area they saw on TV, assuming they’ll be able to sell it for much more. Neither approach works.
If you want to invest wisely, you MUST know the local market. Look at the base price, the after-repair value, and the potential rental return. You may be able to buy a house in the middle of nowhere for $100,000, but if it only leases for $700/month, is it worth it? Not every buy is as good as it may seem.
4. Good Contractors Are Hard to Find
The shows have their own crews. So they don’t film how they find, vet, and negotiate with contractors. It’s tough to find a contractor and crew that shows up on time and completes a job on schedule.
Plus, do you know a reasonable rate for the work? You can buy a perfect investment property at the right price but make the mistake of giving all your profit to the contractor.
5. They Always Use Their Connections
Most of the time, the budget they outline on the show doesn’t equal a realistic cost. Why? They always use their own skills or connections. Many home renovators are artists, real estate agents, or contractors themselves. Never underestimate the value of those skills. The more they rely on their own expertise, the less money they have to spend.
They also use their connections with others. Maybe they have a friend in real estate that gives them a break on commission and offers them deals before they hit the market. Or they have friends around the country who look for bargains at thrift stores and ship them their finds. Each percentage point they save and each deal they find significantly lower their overall budget.
If you’re looking for an investment property, don’t make the mistake of thinking you’ll experience your own disaster to dream conversion. Home makeovers show a great result in little time with practically no hassle. As fun as it is to watch, it’s not realistic.