Thinking about flipping property? There’s a lot you’ll need to know!
House flipping can be a big earner, with average gross profits ranging from $80,000 to $100,000 in prime locations, especially if you work quickly and get the property back on the market fast.
But that doesn’t mean that renovating property is easy. If it were, everyone would be trying it! Property flipping can be a risky business if you don’t know what you’re doing. As a newbie, it’s easy to lose money.
Some properties are made for flipping, and others hide expensive secrets that will eat away at your profit margin – and your sanity! To protect your investment, you’ll need to learn how to spot a renovator’s dream – and how to avoid a renovation money pit.
Here’s what you should look for to make sure you’re buying wisely.
Be Strategic About Location
You’ve heard it before, and we’ll say it again. Location, location, location!
When choosing a property to flip, think carefully about where you buy and research the market in that area. A good location can sell a house, and a bad one can see a beautifully renovated property stagnating on the market for months.
The reputation of an area – and the amenities it provides – will still have a large impact on the profit it can return. A fantastic location can maximise the asking price significantly. Proximity to public transport, schools, shopping centres and other services can all play a role in attracting more buyers.
Spend time researching how much renovated properties are selling for in the area. You’ll need to consider what you pay for the property, how much the renovations will cost you, and then what you can realistically expect to sell it for afterwards. A careful analysis of the possible return on investment can save you a lot of stress down the track.
Prepare for Repairs
Repair and renovation works are expected when you’re flipping a property. After all, you want to add value by updating a house to reveal its full potential.
However, due diligence is the key to purchasing a fixer-upper because unexpected and/or complex repairs can cause a significant renovation budget blowout. Some properties can experience a major value boost with just simple fixes, like fresh paint or landscaping. Others may need more substantial works, including structural repairs and redesigns or costly kitchen and bathroom renovations.
In addition to understanding what renovations are required, you’ll need to decide how much of this you can handle yourself. If you have the necessary skills to complete minor renovations, this can reduce your overall renovation expenditure. However, if you know you’ll need to hire a range of trades to complete the works, this will impact your budget, the overall project timeframe – and ultimately, your profit margin.
Remember that some renovations must be carried out by a licensed professional. Failure to comply can expose you to a host of headaches, including council fines and a lower asking price when buyers spot renos that aren’t to code.
Spotting Red Flags at the Open Home
Property flippers can run into real trouble when they buy a ‘bargain’ that turns out to be a house of renovation horrors. Keep an eye out for telltale signs of possible structural damage during open home inspections. Water stains, strange smells, uneven floors, and wall cracks can all indicate an issue with the foundations.
Before signing a contract of sale, it’s a good idea to work with a professional building and pest inspector to identify property defects and help you devise a repair plan. You’ll receive a detailed report outlining any damage or defect observed, the extent of each problem, and suggestions for resolving them. This invaluable information will assist you to accurately estimate renovation costs – and recognise when repair works go beyond what you can deliver.
Find the Right Experts
To be a successful property flipper, you also need a strong team of experts on your side.
To purchase a property with confidence, enlist the help of:
- an independent building inspector
- a conveyancing solicitor
- a mortgage broker.
When it’s time to start renovating, you may consider engaging the following professionals:
- plumbers
- electricians
- builders
- surveyors
- painters
Whatever you do, don’t skimp on quality. There’s nothing more expensive than a job done poorly!
Finally, once your renovation is complete, work with a real estate agent who can take your property to market and help you secure the very best sale price. This is where your hard work pays off!
