The two live auctions have delivered great results to the Gourley and Schreuder families making $143,500 and $190,500 respectively as pre-tax profits from their successful property trades. Whilst this money is great and the net proceeds can be used towards a deposit for their first home, there is a $100,000 prize available to the family that makes the highest percentage return. Currently the Gourleys have a 24.87% return and the Schreuders a 35.88% return.
What the Wardlaws need to achieve to win
Tonight at 7:30pm on TV One is the big event – the final auction with the Wardlaw Family’s Te Atatu Road property on the block. They have also done an excellent renovation and will line their pockets with great funds for their own first home. However they will need a Herculean performance to win the $100,000 prize on top of their winnings.
Lets look at how much the Wardlaws need to beat the Schreuder family to win the $100,000 extra:
| Wardlaw purchase price | $ 600,000 |
| Renovations * | $ 115,000 |
| Less 50% TV show credit for first $100,000 spent | -$ 50,000 |
| Wardlaw Reserve | $ 665,000 |
| Margin required to beat the Schreuders | 35.89% |
| Profit margin required | $ 238,669 |
| Minimum Sale Price (to win the $100,000 prize) | $ 903,669 |
I have an extensive network of agents in West Auckland, and last night on the phone, text and email they were telling me this is virtually impossible to achieve. So I maintain my prediction that the Schreuder family will win it. A clever agent said strategic bidding from a covert friend or family member which is rare but it does of course happen in auctions could assist the Wardlaws to get the $100,000. I guess if the house was going to get $850,000 for example, then someone could make the business decision to pay $54,000 to get $100,000 (and a Safari Trip for the parents) and yield a $46,000 return for an 85% return on investment almost instantly! I hear them, but personally think that this will be played fairly and this is only a minimal risk of occurring. Like in real auctions without $100,000 bonus prize and a $20,000 Safari Trip for the winning parents, this is very hard to police. You’d have to get a warrant to subpoena phone logs and emails to try to prove it, and it would have to be done face-to-face.
The market is starved of stock but this is a three bedroom house, with two living areas, a garage, a cabin and a freehold title on flat land in Te Atatu South as real selling points. It is the largest house. It had the biggest purchase price – noting all purchase prices were disclosed to the public in the Herald on Sunday article – they are public information anyway with most agents, lawyers, many Council staff and property industry people knowing them anyway. From $600,000 with $115,000 spent in physical cash, 2 months of labour, around $50,000 in retail of prizes, and around five months of market movement still will not give enough to hit the $238,669.
The Wardlaws will do really well and make fantastic money for their own first home. But winning it looks a bridge too far.
* Renovation figure: I understand from the TV show and Twitter that the Wardlaws overspent by $15,000. If I am wrong, and they spent less then to achieve > Team Schreuder’s 35.88% margin, then they will win the $100,000 prize and Safari trip for Mick and Kathy at a lower price. If the Wardlaws spent $100,000 on the renovations then they would only need $883,285 to win. I see this as academic and don’t think the house represents value over $850,000.
Warning: don’t expect the same percentage returns from your renovation
Budding property traders must be aware that these returns are not would they should expect on doing the same project as they have been recording 50% of money they families have invested up to $100,000, not counting hundreds of hours of free labour (and lost income from a job or business whilst renovating for over 2 months), tens of thousands of dollars of value in freebies from the TV show, not counting real estate marketing and agency fees, rates, insurance, legal fees, bank fees, accounting fees, mileage, to name a few of the property trading real costs. In addition income tax and GST for the taxable activity of property trading have not been factored in, so these percentage ‘returns’ are also pre-tax. But this is TV programme and a quick percentage calculation not an accurate property trading financial model.