‘Flipping’ is a term that has received a lot of media coverage recently. With all the media hype it may seem like everyone is getting in on the action. However recent CoreLogic reports reveal ‘flipping’ may not be as popular as portrayed, with flipped dwellings down on previous years. So whether you’re thinking of becoming a successful house flipper or want to learn more about the art, this edition of The Hum is for you, as we take a look at property flipping.
‘Flipping’ is a term used to describe short term property trading where buyers purchase properties with the intention of reselling it for a profit in a short time frame, be it 1-2 years in most cases. Property flippers aim to make a profit through purchasing an undervalued property while riding the capital growth curve until it returns a profit, or through renovations and upgrades.
CoreLogic recently released their 2017 Property Flipping report for Australia and it revealed that only 1.3% of all homes sold in 2017 were flipped in less than 12 months, while 5.7% were flipping between 12 and 24 months.
This compares to 4.4% and 16% respectively back in 2000 – showing a major difference in the popularity of flipped homes.
Even though popularity is down, property flipping is still quite successful with our major cities seeing most of this success – Sydney attracted a 94.3% success rate.
However not everyone is making profits, with vendors in Perth, Hobart, Darwin, regional Queensland, regional South Australia, regional Western Australia, regional Tasmania and regional Northern Territory experiencing the highest percentage of losses in Australia.
Source: Core Logic 2017 Property Flipping Report
With Sydney’s 94.3% success flipping rate, it’s easy to think purchasing a property is enough to return a profit. However, successful house flippers recommend that new and amateur renovators shouldn’t bite off more than they can chew. Tom Hall, a successful flipper with 10 years’ experience under his belt says “if you start with something small there’s less risk… I started with a one bedroom apartment in Carnegie. I had to earn my own deposit, bought it, sold it and doubled my money in three years so it was a good start.”
If you’re setting out on a ‘flipping’ journey, be wary of all the hidden costs which come with the property market.
CoreLogic says “flippers will need to recoup their transactional costs such as stamp duty and conveyancing, as well as their selling costs such as marketing and real estate agent commission. There is likely to also be interest payments on the debt as well as capital gains tax on the profit”.
‘Flippers’ also need to be wary of the property market trends. While the market is hot it makes sense to get into the ‘flipping’ game, however, if the market takes a turn, you may be left with a newly renovated property and a weak market to sell in.
Once you’ve sorted your budget and included all of the hidden costs mentioned above, you’re ready to place an offer on a property. Before signing the dotted line, be sure to research the property market to find a place that offers potential capital growth – CoreLogic evidence shows cities are your best chance at this.
Once you’ve found the perfect property and your offer has been accepted, Domain.com.au recommends pushing for a 90-day settlement period. This will give you time to start planning your renovations while organising tradesmen, builders and everyone else in between to work on the property. This will allow you to hit the ground running from day one, avoiding any delays.
When ‘flipping’ a home, ensure you know the type of person you intend to sell it to. Although you may like to add your own unique flair, a prospective buyer may not be into the same style as you.