Seems a new craze on how to make a quick buck sweeps the market almost every week, none the least of which lately has been buying the renovators opportunity, sprucing it up and flipping it. But how profitable is it really, and where are the pitfalls?
No matter what the TV shows say, flipping is a risky and expensive business. You have to be sure that the cost of buying your property, holding it for the renovation period and the amount of time and money you are going to invest in renovations – is going to give you the return you have calculated. What you put down on paper can be a far different kettle of fish when the paint starts rolling on and the new appliances start arriving.
Planning is essential.
1. Where are you going to buy?
You know a little bit about the property market, right? Because if the answer is, no, you need to start learning fast. The real key to astute investing and therefore flipping, is knowing your market. If you are on the fringe or a straight out new-comer, get some advice, seek out an expert who can help you with market trends and where to start looking for your little piece of gold. While we don’t like to blow our own trumpet, a good place to start is your local agent at vendor – with professionals in a very good choice of locations, we’re bound to have someone who can guide you in the right direction.
2. Make sure everything is covered off
You’ve made a plan and it’s looking pretty good. Calculated the timber, the paint, the tiles, the new bath and the kitchen sink. But what about things like capital gains tax, agent’s fees – and have you even stopped to think about how much the interest on your bank loan is costing you?
It’s the unforeseens that can get you in the end, so drill it down and don’t leave anything out. You want to see a good return if you’re putting in a couple of months of hard sweat and labour – not to mention stress and lack of a social life.
3. Know your market
OK, so you’ve got everything right so far, but do you really know who you are appealing to? What is your suburb profile? Are you going to be selling to young families, or are you more in the retirement belt? Why knock out the walls to create a big beautiful open living area, when a family of five wants to move in and you’re now only offering them two bedrooms? Why build on an extension when the area appeals to the over-50’s looking to down-size. Get the stats and do your homework, once again the team at vendor can offer some great advice.
4. Pro’s and contractors
You’re going to do it all yourself, save money, make a packet. Tread very carefully. The idea is honourable but the execution could be lethal. Sure, get in, get your hands dirty. Rip up the carpet or strip off that ugly old wallpaper, but know when the professionals are needed. It’s not only stupid to try to tackle things like plumbing and electrical yourself, it’s illegal. Do it right and you’re heading for a way better outcome – remember to factor in all of these costs.
To sum it up, there is money to be made if you do it right. Getting the right help and advice at the outset makes really good sense. Do your sums, make a plan and stick to it. And remember, your local real estate agent is there to help you through all of this, whatever questions you have Vendor Real Estate will have an expert to guide you through the process.