With shows like The Block, Renovation Rescue and House Rules dominating our screens since the early 2000s, the concept of house flipping and our love for getting hands-on with a bit of DIY has been popularised and propelled to new heights. But throwing a bit of paint on the wall or knocking together a few raised garden beds are vastly different to flipping properties for profit. Here, we look at exactly what house flipping involves and outline the steps you need to take to achieve flipping success.
What is house flipping?
In essence, house flipping is a real estate investment strategy that involves purchasing a property with the specific purpose of renovating and selling for a profit.
Flipped Home Sale Price – (Purchase Price + Renovation Cost) = Flip Profit. And while that may sound simple, there are many factors you need to get right for a successful flip. Here are 4 crucial boxes to tick before you get started:
- Decide on your approach – do you intend to flip houses as a side hustle or make it a full-time job? Taking on a project on the side is often a good starting approach as it allows you to learn on the job, build your experience and eventually move to full-time flipping if everything goes to plan.
- Learn before you earn – like any investment, house flipping requires a fair bit of upfront learning and research. Educate yourself on renovation costs, the purchase process, the market you’re entering and the industry as a whole. Plenty of books and courses are available, and mountains of videos exist online packed with house-flipping advice. It’s also invaluable to speak with a local real estate expert for insight into the local market.
- Build your reno dream team – even if you’re a jack of all trades, house flipping isn’t a one-person job. Your success stems from the team around you, and this team needs to include experts in their field – from various tradespeople to lawyers, property accountants and a trusted real estate agent. Each member of your team can provide you with guidance and support to help you make the best possible decisions towards the best possible outcome.
- Secure funding – to flip a house, you’ll need a reasonably significant amount of financial backing. In addition to the purchase price, it’s crucial to ensure you can secure funds to complete the required renovations and make loan repayments if the house doesn’t sell as quickly as planned. Look for lenders that specialise in house flipping or real estate investment loans.
Ready, set flip!
Once you’ve taken care of the background work, the exciting part begins – searching for a property and getting stuck in. Here are your next steps:
- Finding the perfect flip – have you heard of the worst house on the best street? This is a common strategy used by flippers which provides some security around the ease of resale and increases the likelihood of a property appreciating over time. It’s often not an easy process to find the perfect flip; in fact, some experts advise that a ‘100:10:3:1 rule’ applies – which says that investors should be prepared to look at 100 houses to find 10 potential properties, put in 3 offers to get 1 offer accepted. Aside from scrolling through online listings, it pays to get the word out to local real estate experts and let them know what you’re looking for – this can help you find the right property faster.
- Get to work – head into your renovation with a solid plan which includes a budget and timeline. There will often be unforeseen factors that pop up along the way but deviating from your renovation plan on a whim (outside of any essentials) can cost you time and, ultimately, affect your overall flip profit. Remember: your renovation must adhere to the Building Code of Australia, and structural changes often require approvals. Be sure to take this into account when creating your budget and timeline.
- Prepare for sale – once the renovations are complete, it’s time for the nail-biting part – getting ready for sale. Work with your local First National Real Estate agent to market the property and attract potential buyers, and check out our tips for preparing a house for sale.
- Evaluate, tweak and repeat – evaluating your results post-sale is a critical step for your future success. Take a deep dive into what went well, look closely at any budget blow-outs that could be avoided in the future, and make any tweaks to your team if needed.
Flipping without the flop
When you combine knowledge and experience, house flipping can be a very profitable real estate investment strategy, but like any investment, it isn’t without its risks. It’s essential to go into it with your eyes wide open and with professionals in your corner. Start by contacting your local First National Real Estate agent – they’ll be able to help guide you through the process and work with you to find the perfect flip.