If you’re thinking about renovating an investment property, like they do on The Block, you should know these risks of house flipping.
It’s called Flipping.
Flipping is a strategy, most often used in real estate, referring to the purchase of an asset with the intent of selling it within a relatively short period for a quick profit rather than holding on for long-term appreciation.
There are two types of flipping. The first is when someone buys a property in a market that is rapidly appreciating and then sells the property fairly quickly with little to no change to the actual property.
The second type has been made much more popular in recent years thanks to reality TV that displays a home’s renovation. This is called a quick fix flip where a property investor uses his knowledge of what buyers want to improve undervalued properties with renovations and/or cosmetic changes, known as a reno flip. Investors often try to resell the property within a year.
While flipping properties is profitable and has made a number of investors a great deal of money, there are some serious risks to consider before choosing to invest in a flip property.
Market conditions
It’s best to do some analysis of market trends and the capital growth potential of an area before purchasing an investment property. If real estate prices across the market fall, selling a property at a higher price in the short term could be challenging even if the property has been improved cosmetically or structurally.
Interest rates
Currently, the median mortgage interest rate for Australia is just under 4%. If rates spike, this could mean higher loan repayments and pressure on your budget.
Having difficulty selling
While no one expects to have difficulty selling their property, the truth is that the market and the demand can fluctuate quickly. It’s important to have a backup plan in the event that you need to hold onto the property for longer than expected. Unfortunately, the costs of being unable to sell can quickly add up and eat into any eventual profit you might make.
Unexpected costs
Sometimes when renovating a property, one change leads to other unexpected changes. Therefore, it’s possible to end up with costs that could not have been anticipated; thus, derailing even the most carefully planned budget. Having a building inspection carried out before buying a property may help you avoid some nasty surprises.
We Can Help
What if we told you there is a better way to invest in property? You don’t have to take big risks to make huge profits. Our team is here to show you how to get predictable income from an investment property, PLUS reduce your taxes and pay off your mortgage faster. At OneCorp, we walk you through every step of the process at NO cost to you. We create a personalized property strategy and help you find the best opportunities on the market, so you know you’re getting the best return. Getting started on your investment property journey has never been easier:- We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
- From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
- Lastly, we find the perfect property to make those objectives a reality!
