British TV station Channel 4 is currently airing the most recent series of ‘Property Ladder’. The basic premise is: Buy an undervalued/dilapidated house, spruce it up then re-sell it. Simple? Apparently not.
This show has been running for a number of years but the latest format helps to accentuate the utter stupidity of some participants. This week’s programme featured two partnerships, each having purchased apartments in Islington, North London.
Team 1 developed a two-storey maisonette on Arundel Park that was purchased at auction. They almost came unstuck. There were early suspicions that the back of the house was subsiding. Fortunately this proved not to be the case, but it was a lesson in not spending £250k based only on an auction description. They followed 90% of Sarah Beeny’s advice and were handsomely rewarded with a larger than expected profit.
Team 2 appeared to be doomed from the start. They overpaid for a large flat in a troublesome location, overspent on the development and were then forced to overestimate its resale value. Needless to say, they had totally disregarded the expert guidance provided by the host. If you don’t intend to live in the property, then surely your motivation for taking on the project is profit? The distressing part is when people ignore advice to optimise the re-sale value. Why do that? The work should hold no emotional attachment.
There were three lessons I hope to take from this:
1, Question your motives – Set your objectives accordingly.
2, Follow expert advice – Especially from those with a proven track record.
3, Profit driven transactions must follow the rule – Buy low, add value, sell high.
Just because these people have benefited from an unusual (and according to the experts, unsustainable) period of growth in property prices it does not mean they have the speculative powers of George Soros or can execute a design worthy of the Richard Rogers Partnership.
Know your limits.
