Renovating and property flipping have quickly become a popular way to earn extra income. If a flip is done right, it can provide an extremely profitable income. There are many individuals that have become ‘professional property flippers’, whereby their yearly income is solely reliant on funds from selling newly updated homes. Selling property following a renovation does not always guarantee profits, however. When it goes wrong, it goes really wrong. Many people have gone into serious debt and even bankruptcy following an unsuccessful venture in the property flipping market. There are so many factors and considerations that go into whether a particular property venture will be successful or not. The cost to buy, the money spent on renovating, stamp duty, interior design and hitting the right market will all determine the level of profit, or lack thereof. Here are ten rules that we have put together to follow when flipping a property
Really, the whole idea of property flipping is to make money. Therefore, you need to buy at a low cost, and sell at a high cost; within reason of course. Make sure to purchase a property lower than it is valued at. This can take some time to find the right place, so you will need to be patient and hunt around a little bit. Never offer the asking price, as you need to negotiate the cost down as much as possible to maximise resale profits.
Factor in all purchase costs
Make sure that you work out your property finance capabilities accurately. You must think beyond just the purchase price of a property. There are so many other financial considerations to factor in such as tax, stamp duty, establishment fees, government costs and loan fees. Therefore, you need to do your research properly to make sure that you aren’t caught out by any ‘hidden’ costs.
Make sure you get all inspection checks
When inspecting a property, you need to look beyond the superficial. Issues such as termites or asbestos can completely takeover your budget for renovations if you do not identify these issues before buying. Look out for signs of water damage such as mould or water marks on the ceiling. Additionally, you should check to see if there are any signs of plumbing issues, or cracks in walls or the celling.
Purchase in the right area
Undertake your research when it comes to up and coming areas. Buying in areas with high demand will increase your chances of successful resale, as well as increased profits. At the same time, do not buy in overpriced areas that have already seen their property boom. It is a delicate balance between striking a desirable location, whilst allowing for a growth in future demand in that location.
Work out your market
If you purchase a property along the coast, then it is most likely that buyers in this area would prefer a light neutral colour palette with coastal and beach style furniture. Purchasing a house in the suburbs will attract families, whilst apartments in city areas will attract retired couples or younger individuals. Thinking about what demographic you are selling to will allow you to make more informed choices when renovating. For example, a house in the suburbs should incorporate indoor-outdoor living so that parents can watch their children play outside. Apartments for either young or semi-retired couples may benefit from a classy bar and entertaining area.
Budget, budget, budget
Always find the best deals when it comes to renovating. If you find rainwater tanks for sale, this may allow you to add value to a buyer whilst not paying full price. You must balance purchasing inexpensive décor items, whilst still maintaining an expensive look. It is a skill to understand where to splurge and where to spend.
Focus on the interior and exterior design
Beautiful coastal home interiors will appeal to individuals in areas near the beach, whilst interesting art deco interiors may be more popular in trendy inner-city areas. Matching the interior and exterior design to the surrounding area will help to ensure that you appeal to the right market. At the same time, however, there needs to be something that sets the home apart from others. A high-end look is the best way to achieve profits during resale.
Don’t make emotional decisions
When renovating, property flippers must not make emotional decisions. This means that you are not creating your dream home, so do not get caught up in buying what you love in detriment to your budget. Kitchens are a huge selling point for home buyers, so here is where you should spend most of your budget. Finding unique selling points like a 5000 litre water tank will also add value for buyers.
Find a great real estate agent
Finding property management services that will give you the best advice is essential. A good real estate agent will set realistic expectations for what a home can sell for. Hunting around for the right agent will help to make informed decisions. Do not just speak to one property agent, as you will be doing yourself a disservice. Not every agent will give the best advice, so make sure to speak to several.
Take your time to find your next purchase
Once you have sold the current home, make sure to take your time to find the next suitable property. Do not develop and ego and become arrogant when it comes to purchasing decisions. It is much better to wait to find the right investment option, than to get impatient and potentially lose money in the future. House hunting can often be overwhelming, so make sure to take a break. Going on a holiday and taking some time off will help to restore your mind so that you are ready to deal with the stresses and complications that can arise during flipping a house. At the end of the day, renovating should be something that you truly enjoy if you decide to become a professional house flipper.