Turn the television on and you’re bound to come across one of many programs devoted to real estate flipping. Flipping refers to purchasing a run-down property at a low price, renovating the property and then selling for profit. What was once the domain of a handful of investors and renovation enthusiasts has become a widespread craze that is appealing to a wider variety of individuals from a range of socio-economic backgrounds.
However, property flipping is not for everyone and profit is not guaranteed. It is recommended that those new to flipping start small and not over-extend their finances. This reduces the risk of things going wrong and allows the flipper to ensure property renovation is in fact for them. The most obvious things to consider when purchasing and flipping a property refer to financial aspects of the renovation such as the property purchase price, servicing any loans, the cost of professional fees such as conveyancing, architecture and planning permits, the cost of contractors, the cost of materials and of course the expenses associated with selling the house such as real estate agent fees and marketing.
Consideration should also be given to taxation requirements. It is recommended that potential flippers make contact with the Australian Taxation Office (ATO) prior to purchasing a property purely for renovation purposes. According to the ATO website, there are different categories that property flippers may fit into and the tax implications vary for each.
Now to look at the positives! Property flipping can be a rewarding pursuit allowing flippers to embrace their creativity, restore historical homes to their former glory and sell for profit. While it is certainly far from a get rich quick scheme, those that are experienced and have done their research can often turn a property around and generate profit in a matter of months.
If you are considering entering the flipping game, ensure you’ve done your homework and are well aware of both the potential benefits and pitfalls.
- Research: Thoroughly research the suburb you are considering purchasing a property in. What are comparable houses selling for? Does the Council have plans for increased infrastructure or new developments?
- Budget: Produce a realistic and accurate budget forecast.
- Cosmetics: Focus on cosmetic property improvements rather than expensive structural changes.
- Use professionals: Utilise the services of professionals to ensure compliance with both government and legal requirements.
- Be practical: Avoid getting attached to the property. Leave emotion and personal taste out of it and think practically. Base design around neutral styles that are going to appeal to the majority of house hunters.
- First impressions count: Tidy up the front yard and home entrance ensuring potential buyers find the house appealing upon arrival.
So, if you are ready for the challenge, & all your homework is done, embrace real estate flipping. It could be a great way to make money & enjoy a massive sense of satisfaction.