You’ve seen the TV shows, and you’ve heard the success stories, but how easy is it to buy, renovate and sell a property for profit in Australia?
And, what about today’s market conditions – can you still make money from flipping houses?
Flipping a property means buying a house or unit with the goal of renovating it, and selling for a profit a short time later.
A fix and flip is hard work, and it can be a bumpy road. But it’s this challenge and the potential profit to be made that inspires property investors from all walks of life to get their hands dirty and have a go.
Here’s what you can do to maximise your chances of success and turn those old, tired bricks into money in your back pocket.
1. Take a business approach
Every seasoned property flipper knows that it’s vital to treat the flip as a business. Formulate a business plan that outlines precise and achievable parameters for your project. Include realistic timings, well-researched budgets and measures to ensure you hold yourself accountable. Unit or house? How much renovation are you up for? And who will do the work?
2. Research the area you are buying in
You can research sold prices online, but getting to know the local real estate agent is a great place to start. They know their market intimately and have a deep insight into the local area. They know what sells quickly, what people are looking for, what they’ll pay a premium for, and what they are willing to pay in the current market conditions. They also have access to off-market listings and know a renovators delight when they see one.
3. Set a budget and budget for all eventualities
Unless you have piles of cash stuffed in your mattress, most of us need to seek financial assistance when investing in property. Go armed for pre-approval with an idea of what you’ll need to spend on a property to maximise its appeal without over capitalising and blowing your budget. Always plan for a rainy day and build in a contingency for when things don’t go to plan with construction or timings. If you can’t sell the property as quickly as you’d like and need to hang on to it for a bit, how does that affect you? Think about interest rates rises and ask about the flexibility and fees to pay back a loan early.
Remember: loans are currently taking longer to process and requirements are more stringent thanks to stricter regulations as a result of the Banking Royal Commission, so build this into your timelines.
4. Buy well – position and potential
A veteran house flipper will tell you it’s not what you sell for it’s what you buy at. Getting a good deal at the beginning with a clear idea on what you’ll need to spend to fix it up is critical. Don’t skip the building and pest inspection as you don’t want any costly surprises during the renovation that will eat into your profit. If you’re going for a short-term return, avoid getting caught up in an over-emotional auction frenzy. This can attract a higher purchase cost without leaving you the time afterwards to wait for market growth.
5. Renovate for your buyer
While you may love a spa bath and pink feature walls, the buyers in your property area might not. Think about your target demographic and what they are looking for, and appeal to the broader market when it comes to design and style choices (we’re talking neutral). Is your finished property going to be appealing to families or downsizers? First home buyers or investors? How can you best appeal to them?
6. Move fast
Time is money and never is this truer than when you’re spending time – and money – on a building site. Until you have sold and settled, you are responsible for paying bills – utilities, taxes, council rates, etc. And then there are the building costs. Remember to factor that into the budget and keep things moving along as quickly as possible while keeping your attention on the quality of the work and finishes for a good result.
Looking for your next property investment? With hundreds of buyers on our books and decades of experience, we can offer expert real estate investment advice on the Hunter Valley. Contact our team today.