We like to keep Newy a secret from the rest of Australia… that’s just fine with us!

While some still haven’t heard of Newcastle, others still think that we’re a dirty coal-mining industrial town.  We don’t mind it like that because we get to enjoy untouched paradise in our backyards, day in and day out, without the hustle and bustle of traffic and where people still say “Hello” when they run past each other on the boardwalks.

This video showcases some of my favourite spots around Newcastle:  Nobbys Beach and Lighthouse, Glenrock Conservation Reserve, Newcastle and Merewether Sea Baths, the Anzac Memorial Walk and so many more.

On the popular TV reality show “The Block”, contestants in 2017 are seen transforming 5 relocated rundown weatherboard cottages into homes that sell under the hammer for $2.615 – $3.067 million and with each couple walking away with a “profit”.   As someone not foreign to renovating old weatherboard cottages around Newcastle for investors prior to becoming a real estate agent, I set out in this article to de-bunk the myth of such quick “12 week” massive profit turn around stories as this….  instead wanting to show that, based on the estimated land purchase price, holding costs, construction costs, selling fees and selling prices alone, these homes ran at significant loss as many previous seasons have!  Instead, based purely on realistic estimates, and recognising the significant purchase price for each residence, my conclusion is that (possibly for the first time ever), once the contestants’ winnings were accounted for, that this project actually may have broken even, or run at only a few hundred thousand dollar loss at worst!

 

One does need to keep in mind that this television show makes it’s money predominately through advertising, ratings and its commercial value, and NOT through property development!  In actual fact, the marketing and advertising arm of the business have in previous years clearly needed  to compensate the property development side sizeably on some occasions.  “Profit” on The Block (in at least my mind) has never been:
end money in   –    all costs    =    what is left over as surplus at the end,
but instead the amount of money that the property sells for above reserve (which is what the contestants get to keep, and with the couple receiving the highest amount over reserve also taking away an extra $100,000).
Now, we don’t have all the figures, like what sort of budget the contestants have for each property (although looking at some of the purchases it would be substantial), but we do have some figures…  and an intelligent “guess-timate, so let’s look at some numbers:
Purchase price of 46 Regent St, Elsternwick in Dec 2016 (which was then subdivided into 5 lots):
$9,600,000
Stamp duty on the purchase above:
$502,490
Interest re-paid based on $12 million at 4.5%
$540,000
Estimate for subdivision, development applications (DA) and construction certificates (CC)
$250,000
Preparation of land for relocation of houses (including preparing piers, driveway lips etc)
$100,000
Estimate of relocation for 5 weatherboard houses (due to good deal estimated @ $20,000 per property)
$100,000
Estimate of total construction budget for 5 weatherboard houses (estimated @ $300,000 per property)
$1,500,000
Agent commission at an estimated 2.5% of total sale price of 5 houses totalling $14,120,000
$353,000
Auctioneers (5 x $600)
$3,000
Marketing budgets for 5 houses (estimated at $10,000 each)
$50,000
Estimated Total outgoings (ie. the cost of the project):
$12,998,490
Total sale price of the five houses at auction ($14,120,000) minus estimated costs ($12,998,490) =
$1,121,510
Total contestant prize money purely based from “over reserve” sales prices $1,220,000

Additional $100,000 bonus for winning couple
$100,000

Once all prize money is accounted for:
– $198,490

Thus, my best guess is that in this season of The Block 2017, there was a total of approximately $1.1 million profit from the complete project based purely on above numbers (translating to be roughly a profit of $225,000 per property), and that once the “over reserve” prize money was given to contestants that the Channel 9 network would have come out roughly neutral or at worst a couple hundred thousand dollars in the red, which is really an exceptional effort considering their profits would be sought through advertising, marketing and sponsorships.

Surprising result….

Reality TV providing a win-win for all parties…  including, one could also add, Dave Hughes (the comedian), who had a buyers advocate bid at auction for him to secure the highest sale at $3,067,000!!!

Now is a great time to be considering buying your first home! With legislation changing reasonably frequently, and different grants and packages available in different states of Australia, this article provides a summary of grants that a newbie home buyer may be eligible for in New South Wales.

Changes for first home buyers were introduced as part of the 2017 State Budget under the State Revenue and Other Legislation Amendment (Budget Measures) Act 2017. Importantly, as of this date, first home buyers do not have to pay stamp duty on both new or existing home for properties up to $650,000, and with stamp duty also being reduced for property purchase amounts between $650,000 and $800,000.

With respect to new homes and new builds, as of 1st July, 2017, first home owners can also access a $10,000 grant for:
– building a new home under a building contract when the combined land and building contract value does not exceed $750,000;
– a new home where the purchaser will be owner-builder and the combined land and building contract value does not exceed $750,000;
– purchasing a new home up to $600,000.

This scheme was set up to assist eligible first home owners to purchase a brand new home or to build, while at the same time assisting the construction market. The amount of money received is determined by the date of the eligible transaction. For a new home purchase, this is the date of the contract to buy or build the new home. If you are an owner-builder, this is the date that building works commence. A new home here is defined as a residential building that has never previously been occupied or sold to live in before… or is a significantly renovated property that otherwise would have previously been demolished.

Such government schemes and incentives are by no means new and while slightly less generous for new builds since 1st July, 2017, they have now reinstated the much needed stamp duty waiver for those purchasing existing property at the lower end of the property market! This is therefore great news for those seeking to buy established, pre-loved homes.

In chatting with people about their experiences in purchasing a home, I regularly hear disgruntled and frustrated property hunters tell me that they have been “gazumped”. While an impressive word to say, it’s far from impressive if you’re at the receiving end! So… what is gazumping exactly and how can a person do everything in their power to make sure it doesn’t happen to them?

The Oxford Dictionary defines the word “gazump” (verb, informal) as “Make a higher offer for a house than someone whose offer has already been accepted by the seller and thus succeed in acquiring the property”. Thus, “gazumping” is doing this to someone else, and being “gazumped” is having this done to you.

Let’s get some facts straight: Just because you have fallen in love with your forever home, placed and offer, negotiated and had the offer accepted, doesn’t mean that the property is yours or will be yours. And EVEN if you have paid a holding deposit, or put down 0.25% of the agreed purchase price AND signed your contract AND given it to the agent doesn’t mean that legally the property cannot be sold to someone else!!! Hang on a minute you say. What do you mean? I know!!! Let me explain:

Firstly, a “holding deposit” means nothing other than that you are showing the agent that you are serious and it is a gesture of good faith. On the agent’s end, there is no legal obligation to only be dealing with you with respect to the property, and they can hold as many “holding deposits” for the one property as they like… Bottom line is: Don’t ever give a “holding deposit” to an agent!

A “holding deposit” is totally different from a “deposit of 0.25% of the agreed purchase price for the property”. The latter is put down if and when you are ready to sign a contract to then take 5 business days to undertake any further due diligence you need to (eg. building and pest inspection, valuation, independent strata report etc). A 0.25% deposit paid with signed contracts from both buyer and seller equals a “conditionally exchanged contract”. This means that the buyer can no longer be gazumped, even if a higher offer comes along. The buyer then has their 5 business days to get further professional information. If, at the end of this time, the buyer chooses to go ahead with the contract, they enter into the “unconditional” phase of the contract until the agreed settlement date. If, however, the buyer decides for any reason whatsoever, not to go ahead with the purchase, then as long as they pull out in writing no later than before 5pm on the fifth business day, all they will lose is the 0.25% deposit (which will then go to the seller). So… the pro of signing a contract and paying a deposit and the property “conditionally exchanging” is that no-one can purchase it instead. The con is that if you choose not to proceed beyond the fifth business day, you forfeit the deposit you have already paid. As an indication, on a $400,000 property this would be $1,000, and on a $1,000,000 it would be $2,500.

Buyers also have the choice of not signing a contract and putting down a 0.25% deposit until after they have done all the checks and balances they feel they need. While there is no risk of them losing any money here other than that which it costs to perform their building and pest inspections and other due diligence, there is certainly risk (especially in city and metropolitan areas across Australia) that someone else could sign a contract and take this property off the market in the meantime. In such a buoyant and fast moving market, I believe it is silly to currently gamble with one or two thousand dollars if you feel that you’ve found your dream home, and especially if you feel that your real estate agent has been up-front and transparent with you about the problems they are aware of that are likely to come up in a building report.

So… It’s pretty easy to see how someone who chooses NOT to sign a contract and put down a 0.25% deposit could be gazumped, right? Right! While they are getting building and pest reports or other things done, someone else comes along, has an offer accepted and signs a contract! But, how can a person who CAN a person who does sign a contract and put down the 0.25% deposit STILL get gazumped?… Well… I basically told you earlier! Did you catch it? The answer is: for a property to be “conditionally exchanged”, BOTH the purchaser AND the seller have to sign the contracts!
So, therefore, it is possible for an agent to take the deposit and the signed contract, but not contact or hear back from the seller for a while…. or for an owner to wait a few days or even weeks to see if “something better” comes along first before signing their contract! The most common reason, however, is that if the agent doesn’t exchange the contract themself but instead sends it off to the person’s lawyer to exchange, this can then sometimes take 3 or more days for them to sort out… and, in the meantime (you guessed it!), person xyz now comes along, loves the property, places a higher offer and then has a faster conveyancer or lawyer (or… as is sometimes the case… is one themselves)!

The best advice I can give you is:
– If you’re buying, ideally your agent will be able to exchange contracts if you ask.. and you ideally want this done asap on the same day! If not, then the contracts get sent to both conveyancers or solicitors. There is not a lot of control as to the speed that this will take for both contracts to be signed. However, at least if you can choose a genuinely excellent and efficient lawyer or conveyancer who is truly working in your best interests to do things quickly, that is the best you can then hope for!
– If you are selling, make sure you have a trusted and competent real estate agent who is used to exchanging contracts and who can do this expeditiously upon your acceptance of an offer. I exchange almost all of my sales contracts myself and this is always done on the same day. This then provides a win-win to both the seller and purchaser, as the seller can see contractural confirmation that heads towards an unconditional contract at the price they agreed to, and the purchaser can rest easy knowing that before they go to bed that night that they cannot and will not be gazumped.

The bottom line:
– Remember that a property is not yours until both you AND the property owner/s sign the contract and you have put down your 0.25% deposit;
– If you are sure that you want the property, and believe that the risk of losing the property is greater than anything that may be found through building and pest reports, bank valuations etc, then taking the property off the market with a 0.25% deposit and signed contract is a good way to go.
– Ideally, try to get contracts exchanged conditionally on the day by the agent. If not, then unfortunately it is a bit of a waiting game with the hope that no-one else comes in with a higher offer (or quicker conveyancer/solicitor) in the meantime!