In Woolloomooloo, a suburb in Sydney, two men stand inside a dilapidated house they had bought, explaining the renovations they plan to make: wood floors in the living room and bi-folds at the balcony. They also mention they are on their way to demolish the bathroom, improve the kitchen and find a solution to what they dub as “the problem room.” Their goal? Sell the renovated house for higher than their buying price.
These men are contestants from The Aussie Property Flippers, a television series in which couples “flip” houses: they buy a low-value house, renovate it and sell it to make a quick profit. The show, as well as other home renovation series, have promoted the idea that people can make a living out of fast-paced, often dramatic renovation projects.
The question is: is house flipping really as profitable as it appears on television?
Is house flipping worth it?
House flipping is not for everyone, as it requires an investment of finances and time. According to property expert Michael Yardney, house flipping is a wrong strategy to adopt, as renovations require more time and a different level of expertise. Most of the profits quickly earned through flipping will also be eaten up in costs.
Despite the dissuasion from experts, the challenge and potential profit are important driving forces for some people to flip for profit. Some “flippers” report to have earned millions of dollars by transforming a house into a high-value property using a limited budget.
Increasing your profits through house flipping
The key to success in house flipping is to minimise costs without forgoing quality. Here are three effective tips to increase your profits when completing your project:
Understand the risks involved
Although there’s a chance you can get a quicker return on investment from flipping houses, you also stand to lose money instead. Be aware of the market conditions, property interest rates and unexpected costs that come with flipping houses.
Do research on the area
Research the community, crime rates and nearby establishments, as these are important factors homebuyers consider when searching for a house. Searching for the average salary in the area also gives you an expected price range to list for the property.
It’s recommended to look for homes to flip in popular areas. According to CoreLogic, which provides property and consumer information, Sydney and Melbourne are the most lucrative capitals for flipping.
Accurately estimate expenulator
When installing enhancements like new cavity sliding doors or a new roof, be as accurate as possible in estimating costs. Check home improvement stores to get an average cost of materials and network with suppliers to get a competitive price.
Choose valuable upgrades
Not all upgrades will improve the value of a property. Consider renovating areas with a high return on investment, such as the home exterior, kitchen and bathroom.
House flipping is a profitable business that, if done right, can earn you tens of thousands of dollars for a single home. Unlike the dramatisation on television, though, the reality is that the renovation process has numerous risks involved. With extensive research and solid financing strategies, you have a chance of earning a high amount out of renovating a property on a limited budget.