Monday, April 14, 2014

Imagine or Dream?

I am right now sitting at the dentist's office, waiting on my son to finish his appointment. I have few minutes, and a WiFi connection. Time to blog!

My Dentist has a TV in the waiting room, which is good. They also play HGTV channel which is, well, interesting, and a whole lot better than CNN.

Don't get me wrong; I like home improvement, but these shows are basically 30 to 60 minute commercials for products most of us don't need. Another example of the Great American Dream Machine.

Like the show on now: 'Income Property'. What a joke.

An unmarried couple, who have been dating and living with their parents for TEN YEARS are looking for a rental property, so they will have some income so they can afford a home. They are spending SIX HUNDRED AND FIFTY THOUSAND DOLLARS! Sorry for the all caps, but Holy Cow! They are planning on spending almost 3 times the average home price. Maybe that is average in their market, but still, what is the average income? They are looking at a rental unit worth $1800 a month; again- Holy Cow!

Then the improvement starts; basically 5 or 6 minutes of destruction- where they teach the new homeowner to swing a hammer- and then 5 or 6 minutes of construction- where they teach the homeowner to use the new found hammer swinging skill to drive a nail- and then tell you how much money the work is worth.

They miss one or two points on these deals; what it costs to BE a landlord, and then to share your home with strangers. And then be forced to collect money from them on a monthly basis. Want to have a family party in the back yard? What was once private space is now a fishbowl with your tenants looking on. How much is your privacy worth?

And where do the tenants live? Below you, where every step you take thunders on their heads, or upstairs where their steps will pound on yours?

Plus, they don't talk about the costs associated with being a landlord. Rental income isn't tax free; it IS income. Then there are the costs of repairs and maintenance on the unit. Then most cities will have a tax per rental unit. Do you own the property as individuals, or do you form some sort of company? Individually has risks- like if the tenant's kid falls down the stairs and breaks a bone- but companies mean you need to have an accountant and an attorney to handle the paperwork and taxes.

None of this is mentioned in the show at all. Most of it is just shopping. Dream Machine, remember?

These are the same types of shows that a few years ago were all about property flipping. We saw how well that turned out, right?

Maybe things like this work out, but like in this show, they are borrowing a couple of hundred grand - yes, $200,000.00 for the down payment, and then another $70,000 for the renovation. Plus the mortgage. Not a problem, they feel. And the obligatory lesson in how to swing a hammer. That's where the renovation budget goes sky high.

Will this work out? We will never know. I suspect a disaster in the making. These folks don't know either; this is their first home, right?

Ever notice that these shows usually feature newbies? Is it because the folks who have done this before know better than to do the types of things that make for drama on these types of shows? Probably.

But the big question; was the show entertaining?  Eh; not for me so much. But it was a lot better than the alternative; CNN.

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