It can be any properties investors dream to find a diamond in the rough and flip it to something worth more, but this is not as easy as it sounds. It requires skill and an eye to see whether a property is worth the investment or not. Here is what you need to know when it comes to flipping property.
What is flipping property?
This basically means purchasing a house that is undervalued, renovating it to sell at a value that churns out a profit. However, there is a lot that goes into this art form of house buying that needs to be carefully considered. This is challenging in the sense that as an investor who wants to flip a house you need to do so in a short time frame without pumping in too much money into it or you could lose out financially and not maximise on profit. It is basically the DIY of house buying.
Are you built for house flipping?
Let’s face it, house flipping is not cut out for many investors. According to Roy Morgan, 62% of Australians carried out renovations on their home in 2016. But not all renovations carried out added value to the house.
Although there are huge profit margins you can gain through house flipping there is also a considerable high risk to it in the sense that the house may not sell for as much as you thought it would. Some things to consider before venturing into house flipping is the fact that you need to carefully plan every aspect of the project in order to stick to a time frame and budget that will not end up costing you more than it should.
There is also the fact that you first need to search for the right property, in the right neighbourhood, and the cost of renovations it will need to see if it is feasible. You also do not want to slap a high price on the property that no one is willing to buy.
Potential risks to keep an eye out for
Perhaps it will come as no surprise that there are some properties that sell for less than what they are actually worth. Putting in the research to see what could potentially put your investment venture at risk can pay off. Somethings that could put your investment at risk is the market condition in which you plan to sell your flipped property. Before you renovate check to see if the conditions are favourable in the area for you to renovate and sell a house in a short time frame.
Check to see if the type of house you are planning to sell is one that is popular among buyers in the area. The last thing that you want is to hold onto a property for too long and lose the potential of turning around a profit in the process.
Avoid purchasing a house that has not been evaluated by a property evaluator. Not only will this help you avoid purchasing a dud, but it can also prevent you from falling into the 36% of Aussie renovators that exceeded their budget when it came to renovations.
The take home for house flipping is to always research if you will be able to afford this venture and if you will be able to complete it in the allocated time frame.