Watching The Block’s Elyse and Josh sell the property they renovated for $450,000 over the reserve price last year, makes doing up property to sell for profit an attractive option.
Flipping property, though, can be a risky and expensive business. It’s no wonder, then, that CoreLogic’s recent report found that onlyof dwellings sold in 2017 were flipped. The good news for those investors, though, is that properties flipped in 2017 did sell for profit.
But how substantial is that profit? And are you the right person to flip a property?
Before you put down a deposit on a renovator’s delight, and follow in Josh and Elyse’s footsteps, make sure you take a long hard think about what’s involved, and know flipping is the right strategy for you.
Consider market cycles
Ideally, you buy property at the lowest point of the cycle, and sell at the highest. While some research can help, it takes a lot of luck to judge this cycle correctly. Other than crossing your fingers, the best thing you can do, is talk to your local real estate agents, watch market trends closely and pay attention to what is selling, and why.
Make sure your research focuses on your local property market. Whileof flips in Sydney were profitable, only Darwin flips were. Be smart and thorough about your investment, before diving in headfirst.
Know who you are selling to
It can be tempting to pour your creative energy into your project, and create your dream home. Before you do, consider the tastes and needs of your actual buying market. Think about the number of bedrooms, and research the demographic of your potential buyers. Then research what suits them.
Know your level of experience
While most of us are not builders or electricians, many of us have a handle on basic DIY. But will it be enough to flip your property for profit? Before you buy to flip, think practically about the skills you do have, and the skills you are going to have to outsource. Then research costs involved. Ideally, you will be able to get quotes from builders, plumbers and electricians before you invest. Use these quotes to prepare a solid budget, so you know the type of costs to expect.
While they are not necessarily glamorous, you will also need to organise building and pest inspections. You don’t want to be caught out by major structural changes, which blows your budget completely.
Consider all the costs
The cost of flipping is not just the cost of the renovations themselves. You also need to factor in buying and selling costs, agent fees, conveyancing fees, stamp duty, interest and loan establishment costs. Consider, too, that your profit will be taxed.
Talk to yourand your financial adviser about your plans to flip. Get your head around the real costs, and your financial position before you make the leap.