Flipping a property can be a worthwhile venture, but requires careful planning and an eye for detail. Whether you’re a first-timer or a seasoned flipper, there are essential factors to consider before diving into a property investment to ensure its both smart and profitable.
1. Location is key
You’ve probably heard it a million times, but location truly is everything in real estate. A property in a desirable neighbourhood will attract more buyers and higher prices, however, if you’re not able to afford a prime location, do some research on up-and-coming neighbourhoods that are starting to see an increase in buyer demand.
Keep across any new developments such as a new shopping centre or upgrades to public transport which can help local property prices boom and provide a good return on investment. Also consider other factors in the local area including nearby schools, how close you are to amenities such as parks and if crime rates are low (check out your state police website for crime maps and statistics).
2. Be budget conscious
Before you buy, crunch the numbers. Determine the purchase price, estimated renovation costs, and any additional expenses like insurance. It’s crucial that once you have those numbers to include a buffer that can cover any unexpected surprises that often occur during renovations, particularly in older houses. Don’t forget to also factor in the interest you’ll be paying on the loan while renovations are being completed.
If you’re in the market for an investment property, check out our range of home loan options or chat to one of our Lending Consultants who can help you choose the right loan for you.
Another aspect to consider is not overspending on a property to ensure a profitable return on investment. Paying more for a property than it’s worth or spending too much on the renovation could impact your profits and how long it takes you to sell. Make sure to have a good understanding of the local market and chat to an expert who can guide you in making the right decisions.
3. Understand the market
Study the local real estate market to understand what types of properties are in demand. Are buyers looking for small family homes or bigger blocks of land?
Get an understanding of what features buyers are they seeking, such as an office space, open floor layout, or multiple bathrooms. Knowing this will help you understand how much work may need to be done to meet market demands.
Tip: In a suburban family-friendly neighbourhood, buyers might prioritise extra bedrooms and outdoor space, while in a trendy urban area, sleek, modern finishes might be more appealing.
4. Inspect thoroughly
A thorough property inspection is non-negotiable. Structural issues, outdated electrical systems, or hidden water damage can quickly turn a promising flip into a money pit. Hire a professional inspector to uncover any potential problems which may end up outweighing the benefits of flipping that particular property.
5. Be strategic with renovations
Focus on renovations that add the most value. Kitchens and bathrooms often provide the best return on investment, as they are major selling points for buyers. Also, consider energy-efficient upgrades like adding new windows or a modern air-conditioning system, which can attract buyers looking to save money on utilities through sustainable design and build choices.
6. Timing is everything
Timing is crucial in real estate. Ideally, you want to buy when prices are lower, renovate quickly, and sell when the market is favourable.
You also need to consider Capital Gains Tax (CGT). A capital gain is the profit earned on an asset when you sell it, which includes investment properties. There are a number of exemptions when it comes to paying CGT so be sure get an understanding of how long you need to hold onto a property for so you can reduce your tax bill and make the property flip as profitable as possible.
7. Work with professionals
Surround yourself with a reliable team of professionals, including a real estate agent, contractor and inspector. Their expertise can help you navigate the complexities of buying and renovating a property, ensuring you avoid costly mistakes. A seasoned real estate agent can provide insights into the best neighbourhoods for flipping and what buyers are looking for, while a skilled contractor can help you budget accurately and complete renovations efficiently.
Flipping properties can be both rewarding and challenging but thorough research and careful planning are your best allies in the property-flipping business. By considering all the key factors involved, you can make sure your investment of both time and money get you the best possible result.
Auswide Bank Ltd Australian Credit Licence 239686 is the credit issuer. This is not an offer to lend – approval is subject to credit assessment criteria. Terms, conditions, fees and charges apply – full details on application. This information provides general advice only. We do not provide advice about this product based on any consideration of your personal objectives, needs or circumstances.
