1. Location, Location, Location
When you are purchasing a house to flip, location is the single most important thing to consider. This can be a difficult one because the best block to flip might not necessarily be in the location where you would like to live. When you are looking for a home for yourself and your family to live in, emotion plays a great role in finding the right property. However when it comes to purchasing a home to flip – you must use your head and try to leave emotion waiting patiently on the doorstep. You need to consider your target market; the kinds of people that will be looking to purchase the property when you are ready to sell. Almost every single one of your potential buyers (regardless of their budget, status or family size) will want a new home in a great location. You will want to consider proximity to transport, schools, shops and the reputation of the neighbourhood. If you can find a property that ticks all of these boxes, you might increase your target market significantly, and we all know more interest = higher selling price. The location of the home is one of the few items that you won’t be able to change when flipping, so be picky and choose wisely.
TOP TIP: Having a better understanding of your potential buyers will give you a better idea of what style of home and the most desired features to include. This is where preparation really does pay off. If you want to know more about buying the perfect block, head over to our blog post on what to look out for when looking for the perfect building block.
2. Inspect (and then inspect some more)
Even if you are never planning on living in the house, it is essential to inspect it well. If you find something that you weren’t expecting after you purchased the property, it could cost you a fortune. We recommend that you get a building inspector to inspect the property first as this can help give you a good idea of whether the property is worth the investment. Remember that if the price seems too good to be true, it probably is. Things to look out for might be any evidence of pest infestation including termites, rot and mould and any significant damages or deformation to the structural framework of the property. The only time that you would consider skipping a building inspection is if you were planning a total knockdown and rebuild, which rings alarm bells for us when it comes to overcapitalisation (especially when flipping houses).
TOP TIP: Unless you have experience with flipping houses (and if this is the case, you probably won’t be reading this blog) stick to renovations and extensions instead of total knockdown…baby steps.
We talk about this quite a bit throughout our other blog posts but really can’t stress enough the importance of having your finances in check. We always suggest that you meet with an accountant to give you a better understanding of your current finances as well as a prediction of where you would like to be and what you are hoping to achieve. If you need any recommendations we have some incredible accountants and business specialists who we have employed for our own uses as well as our clients. A comprehensive business plan can be shared amongst all those involved to ensure that everyone is on the same page. This takes us to our next point…
4. Build a strong team
While the idea of flipping a house and keeping all the profits for yourself is a lovely thought…it is unrealistic. Trying to do the whole project yourself or with a cheap but inexperienced team can lose you valuable time and can end in burnout (trust us, we have been there before). If you don’t have experience in project management or carpentry, this might not be the time to start. We repeat: put down the nail bag. Selecting the right team to work with you is so (so) important. While there will always be an inclination to choose the cheapest quote, they may not be the most time-efficient or professional team; which can in turn reduce the quality of the work and subsequently the asking price of the property. If you need some extra tips about how to choose the right builder, head over to our blog: “Questions to ask your builder before you sign the contract”.
Remember that you want to get quotes well in advance to help you with the initial budgeting stage. This can be difficult as some builders will be reluctant to provide a quote if you haven’t yet purchased a block with DA approval. If you are struggling with this, or if you are concerned that you might get taken advantage of, don’t hesitate to get in touch and we can talk you through some options.
You will also need to consider developing a strong relationship with a real estate agent who has a sound knowledge of the property market. You want to do this well in advance and certainly prior to the time when you come to sell your property. We recommend having conversations with real estate agents during the planning stages and potentially even when you are looking for a property to buy. If you are able to find an agent who can see you through the entire process, it can ease the stress of having to develop another relationship in the process (trust us, you will be meeting and managing many relationships during this process and you will be grateful for one less new face). At the end of the day, it is about finding a team to support your venture and a team that you can trust.
5. Count the cost
Our final tip is do not spend more than you can afford to lose. It is just not worth the risk. Flipping houses and making some extra cash is great, and there are many people who are making a comfortable lifestyle out of flipping houses, but there are also people who lose everything from attempting to flip. There are so many factors at play (market, team, budget) and it is important that you consider the impact that it might have on you and your family should you break even or even lose money in the project. The property market is an unpredictable beast and you should always consider the worst-case scenario. On that light note, let’s get flipping!