Flipping houses in Australia: Easy profit or overhyped fantasy?

In this article:

• What is house flipping?
• 5 house flipping tips from the experts
• Potential risks to be aware of with house flipping

What is house flipping?

House flipping is an investment approach that typically involves buying undervalued properties, renovating them and then selling them on at a profit. The aim is generally – theoretically at least – to complete this process quickly and to spend as little as possible on the renovation in order to maximise profit before moving on to the next ‘flip’.

When you consider the investment of finances, time and emotion that can be involved, house flipping may not be for everyone. But for some ambitious Australian investors and renovators, the challenge and potential profit are significant motivators.

If you’re considering tackling a renovation project for profit, there’s a lot to think about: finding a suitable property, financing it, renovation costs and more. Canstar spoke to a range of experts who offered their tips for would-be house flippers.

5 house flipping tips from the experts

1. Do your research to help avoid dramas down the line

Shelley Craft has presented The Block since 2010 and has seen first-hand the drama and stress that renovation projects can involve. She recommended planning ahead so you can keep a cool head when the pressure ramps up.

“There are going to be high emotional states and stress levels no matter how big or small your renovation, and if you are committing hard-earned dollars to a project, you want the best results,” Shelley told Canstar.

“Dealing with contractors can be very stressful if you don’t speak ‘tradie’, so brush up on your measuring skills and learn some of the terminology used by tradespeople so you can communicate your message more clearly. This is where picture references come in very handy.”

Shelley reminded people interested in learning more about property flipping that your budget is crucial and time is money on a building site.

“To alleviate some of the stress, make sure you have a very clear budget and stay on top of it from the get go. Ask your contractors for their best hourly rate and their professional estimates of time and cost before you embark. Shop around till you find a team you feel comfortable with and be upfront about your expectations and budget with them,” she said.

“Stress comes from the feeling of being out of control and out of your depth. If you get all your pre-planning locked down and you go into your renovation armed with as much knowledge as you can, it can and should be an incredibly rewarding experience.”

2. Make sure you ‘buy well’

Canstar’s Steve Mickenbecker is one finance expert who believes house flipping isn’t for the faint-hearted.

“There are considerable risks and you shouldn’t be making these decisions on a bored and rainy Sunday afternoon,” Steve said.

“If you expect to make a short-term return, it means that you are going to have to buy well. That means walking away from any property that is not under-priced. Don’t get caught up in an auction frenzy. Wait for the next one.

“If you are renovating, get your costings right and make sure of planning approvals. Understand the condition of the property so that you don’t find unpleasant surprises as you go,” he said.

3. Consider the finance carefully

According to Steve: “When considering the financing required, don’t feel that it doesn’t matter because you won’t be repaying the loan for long. Assume the worst – that you won’t be able to sell for the price you want, and will have to hold the property.

“This means you should consider getting a loan with a rate at the low end of the market. It must have the flexibility to be repaid early, which will rule out most fixed rate loans. Of course, you must be able to afford the repayments, or the bank will make the decisions for you.”

Steve said plenty of people had gone into property development thinking it was easy money, only to have experienced one or several of  many possible pitfalls.

“The lucky ones have survived because the market moved the right way for them, but don’t rely on being lucky.”

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