Six Things You Won’t Learn About Real Estate From HGTV

“No real estate is permanently valuable but the grave”
– Mark Twain

“If you want to know exactly where the property line is, just watch the neighbor cut the grass.”
–Unknown

Today, I was in the gym. The person before me had left the television on, and it was on HGTV. Not exactly ESPN – the usual gym fare – but as long as it wasn’t Food Network, that was fine with me, particularly since the show was “House Hunters International,” and I have a fascination with expatriates. As an aside, who really WANTS to watch the Food Network while working out? Does seeing someone cooking a giant chocolate cake really make you run faster or lift harder? It just makes me nauseous.

Anyway, if you’ve not seen the show, the premise behind House Hunters International is that U.S. citizens go somewhere else in the world and go looking for property. The agent shows them three pieces of property and then the buyers make a decision. Granted I’ve only seen three episodes in my life, so I’m extrapolating, but so far, the plot hasn’t changed.

In this episode, the woman was trying to buy an apartment in Paris. Her budget was $1,000,000. The real estate agent, helpfully, showed her three properties which each had a price tag over $1,000,000. Two of them needed work and renovation as well.

So much for budgets.

The woman thought about it and finally picked a place. Six months later, she was happy as a clam. They’re always happy as a clam six months later. I suspect that HGTV cans the shows where the post-purchase interview is reminiscent of Tom Hanks and Shelley Long in The Money Pit.

The next show which came on was “Income Properties.” All I caught was the intro segment. The person whom they were featuring had a rental home. His mortgage was up for renewal. Apparently, his rent was barely, or worse, not even making the mortgage payment for him. He wanted to renovate the basement to be able to rent it out so that he could go buy another rental property. Fortunately, at this point, I was done with my workout and left the gym, so I didn’t get to see how the episode ended.

I can imagine that there are people in the United States who watch HGTV and think “I can do that!” Two years later, they’re up to their eyeballs in debt and underwater in an investment property they couldn’t afford with a renovation that cost 2.5 times what the contractor had originally budgeted. That doesn’t make for good TV, though.

What lessons shouldn’t you take away from HGTV?

Only look at three properties. I don’t care if HGTV is flying me to the end of the earth for the show. There’s no way I’m only going to look at three properties and then make a decision on which one of the three I’m going to buy. While I don’t want to get caught up in the tyranny of choice, I also am not going to be so naïve as to think that three properties are going to be enough.
Don’t negotiate. I’ve seen two episodes where buyers paid full price for fixer-uppers. My definition of a bubble is when there’s much more demand than supply and people will pay anything for any type of supply. At that point, you want to either be a seller or sit out. You don’t want to be a buyer. There are some instances where paying full price is acceptable, namely, the listed price is a fair price or better. However, these people didn’t even try to negotiate.
You can flip that house too! Buy a house, slap on a coat of fresh paint, jack up the price, and sell. I’ve nearly lost my shirt on renovations because I didn’t know what I was doing and my contractor had no sense of budgeting or management. The people on TV have crews who are experienced, and they’ve done rehabs before. They can walk through a house and estimate repair costs and time and usually be within 10% of their original estimate. You can get to that level of capability, but it takes time and work, and either a great relationship with a contractor or a LOT of elbow grease.
You deserve to have a house full of nice furniture. Actually, you don’t. You might earn and be able to pay for a house full of nice furniture, but you don’t deserve it. Nice furniture and interior decoration is not an inalienable right.
The list price on a home is the only price you pay. Don’t forget to budget for closing costs, loan origination fees, and the money you’ll spend getting the place to look the way you want it. It’s fine to spend all of this; just make sure you can afford it and that you’ve accounted for it.
Repainting your bedroom will be the thing which makes you really happy. Finding meaning in life and focusing your life and your energies on the things which are REALLY important to you will be what brings you happiness. A nice coat of paint won’t hurt, but it won’t bring you the peace and happiness you seek.

Real estate can be a great investment if done correctly. Your house can be a place where you enjoy to stay and entertain friends. However, real estate is also an enormous investment, and entering lightly into it, either as a home or as an investment, can dig you into a real money pit.

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John Davis

John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.