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Flipping Homes: How to Avoid A Disastrous Flop

Flipping Houses has been popularised by TV shows like The Block, Property Virgins – even the Vanilla Ice Project (yes, the Ice Ice Baby rapper is now a successful house flipper) and a lengthy list of other DIY renovation shows.

The popularity and proliferation of these shows make flipping seem like a fun way to be creative, test your eye for renos and make a tidy profit while you’re at it.

Following this trend, in most cities of Australia house flipping is on the rise. Recent data from CoreLogic shows the percentage of properties owned for less than two years has grown. CoreLogic data also indicates that Sydney has the highest rate of house flipping in the country with 6.8% of property re-sales over the last 12 months being flips, flowed by Queensland with 6.6% and Melbourne at 6.4 per cent. All of this coincides with strong capital growth in our major cities and makes a solid case for the notion that the flipping scene here is strong.

WHAT IS HOUSE FLIPPING?

Flipping is the process of buying a property with the intention of renovating it and selling it for a profit. It is typically done over a short period of time, generally months as opposed to years. This is a totally different mentality and approach to ‘conventional’ property investment, where you might hold onto a property for years, even decades.

KEYS TO SUCCESS

  1. Know Your Flip

The quicker you can renovate, the sooner the property will be ready for sale. Before jumping straight in, get your costings right and make sure you can obtain all the necessary planning approvals. Understand the condition of the property so that you don’t uncover any nasty setbacks once you’re well and truly committed.

  1. Have A Plan

Thoroughly research the market, work out a proper, realistic budget that you can adhere to, and create a timeline for your renovations so minimal time is wasted (build in some flexibility here because tradie timelines can change daily). Getting the project firing on time and on budget helps enormously – especially if you are holding a loan, as any unexpected surprises will delay the sale of the property and result in you paying more interest.

  1. Buy Cheap, Buy Smart, Buy Well

If you expect to make a healthy short-term return, it means that you are going to have to buy well. That means walking away from any property that is not an extremely well-priced option in the geographic area and definitely avoiding any bidding wars at auctions. With some thorough research and consulting your local agent, finding a property priced in your sweet spot helps to maximise profits when it comes time to flip.

  1. Know What to Renovate

Spending your renovation budget on the right parts of the property will again optimise your profit and enhance your prospects for a nice windfall. As all interior stylists know, buyers notice renovations on kitchens and bathrooms more than on bedrooms and other areas of the home. Having a clean, tidy yard and a new coat of paint are cost effective, don’t hurt your budget and make a greater impression than more expensive alterations that may not hold as broad appeal.

  1. Engage Your Agent

House flipping can be fast paced and competitive. Properties need to be extremely well-priced but also show potential. There’s a big difference between a well-priced home with potential and a cheap money-pit. Your local realtor will have the inside scoop on these opportunities and with each successful flip will be in hurry to bring you your next opportunity.

When you consider the investment of finances, time and emotion that is involved in investing and renovating, house flipping may not be for everyone. But for many Australian investors and renovators, the challenge and potential profit makes it a tantalizing prospect.

Like all short-term, high return endeavors, flipping comes with high risk and uncertainty. However, with the right planning, research, preparation and dedication, house flipping can be a fun, profitable experience for those who really invest themselves into it.

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