Flipping a property isn’t as quick and easy as it may appear to be on popular renovation shows. There are many variables to consider before taking this big leap and embarking on a new property flipping project.
Plan a budget
First things first, budget. Before starting, you will need to set a clear budget. This doesn’t only include the cost of the initial purchase price but also materials, labour and appointing an agent to sell the property post-renovation. Mapping out a plan where funds will need to be paid is a good suggestion. Keep in mind to allow budget for potential problems that may occur, which could potentially exceed your budget. This allows you to be prepared if disaster does strike.
Find a property
When choosing a property, compare it with the price of renovated equivalents in the area to determine the potential profit. Properties scarce in kind, such as period homes or older style flats, in lifestyle locations close to employment opportunities, transportation, cafes, restaurants and recreational facilities. Areas with these lifestyle attributes make for rewarding renovation projects with interest from both tenants and buyers.
Finding the right property also depends on your skillset. If you are confident in your ability to assess a property and understand what needs to be done successfully, you may choose a property that requires a larger renovation and structural improvements in the hope to get a higher return. However, if you aren’t confident in a total house flip, and looking at a smaller return, consider a property that doesn’t require too much work.
Before buying, obtain a building inspection. This is imperative as you don't want any hidden little surprises appearing that may impact your future property.
Determine how much work you are planning to do on it and whether you’re willing to tackle structural changes. Some renovators make the mistake of customising the home improvements after their own taste and style, but to get a good return you need to identify the needs of the local demographics in the area. If you’re unsure of what to do, it may save you thousands to engage some independent advice who can give you a better understanding of what future buyers or tenants are looking for in that specific area, so that when you do sell or lease it, you’ll get the maximum return on your investment.
Once you start the renovations, keep in mind that you could save costs by doing parts of the renovations yourself instead of completely relying on trades. Just remember that certain parts will require a qualified professional, like a plumber or electrician, in order to pass building approval.
Flipping property can come with its fair share of risks. Some risks to take into consideration is overcapitalizing, you don’t want to spend too much on features that might not give you any return on your investment. Keep to your budget and allow extra planning before purchasing a property to minimise the risks and potential additional expenses.
As flipping houses has become more popular along with the constant changes on the market, you may find it more difficult to sell certain properties. If this were to happen, you might consider renting it out until you can find a buyer, have this as a backup plan and take it into consideration when first buying.
Good planning and preparation is crucial to a well-executed and profitable renovation project. Before buying a property, seek a local real estate agent, town planner, a builder and a valuer in order to understand the local laws, regulations and market conditions that impact the property and your proposed renovation.
Greville Pabst is CEO of WBP Group. www.wbpgroup.com.au
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