Australian property market has been continuously growing, thanks to the increasing demand because of its booming population. With this, many trends have arisen through the years in the real estate sector, including house flipping.
But what is this scheme? House flipping is a kind of investment wherein investors acquire undervalued properties which they renovate. The enhanced property will then be resold at a profit. Under this scheme, the investors should complete the process of renovation and sell business properties quickly and spend only on the necessities to maximize the profit.
With popular television shows in Australia, house flipping has become popular in the country. However, the number of people doing house flipping, while they are existing, is not as high as expected. According to a study, only over 5 percent of the real estate property resales in the key Australian cities were flipped one to two years of purchase in 2017. The figure was double way back in 2002.
Regardless, if you are considering house flipping, there are many factors you have to account for. These include finding the right property and ensuring the source of financing for the venture. Let us discuss more tips that can be helpful for your house flipping project.
Conducting Market Research First
It is important to have the relevant knowledge in the field, including the technical aspects. Being in the know can help you better plan on your strategy for the venture so you can be at peace when the pressure comes surging in. Remember that house flipping can bring you high stress levels because of the financial aspect.
At the same time, you also need to deal with the contractors doing the renovation on the property. You have to know as well the basic “tradie” jargons so you can communicate better with the workers. This way, you can make sure that you get what you wanted out of the renovation.
If you also conduct prior research, you can set up your budget well. You can make sure that you can prioritize the necessities so you can maximize your profits.
Choose the Right Property
In house flipping, finding the right property is the key to earn big profits. Choose an undervalued home with a lot of potential. Make sure that it is in a good neighborhood. At the same time, the renovation should not be too much that it would actually drive up the selling price to the point that reselling might be extra challenging. You will not want an idle property in your portfolio if you want to have short-term earnings.
Check the Supporting Finance Very Well
Ensure you have the financial means to back your house flipping venture. Get a loan with a considerably low rate so repayments can be more affordable. The general advice is to get the loan you can actually pay regardless if you are able to sell the house or not.
After securing the financing, you also need to monitor your costs well. You would not want to waste your money on unnecessary purchases or avoidable mistakes.
What Are the Usual Risks in House Flipping?
Like in any business venture, house flipping has its risks, including the following:
- There are market conditions investors should consider. If general house prices drop, you might find it difficult to sell the property at a higher price even after doing some renovations.
- If the interest rates are higher, this means loan repayments will be higher as well.
- There might be unexpected costs not accounted for in the budget that could derail the project.
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