Making money buying and selling houses is hard work, but it can be rewarding. Find out the pros and cons with Savvy.
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Flipping houses isn’t as quick and easy as its name suggests, but there’s money to be made buying and selling investment properties in a red-hot property market when interest rates are low. Find out how to go about flipping homes, as well as some of the pros and cons of doing so, with Savvy.
The concept of property flipping involves buying investment property which is run-down or in need of repair, carrying out improvements and selling again for a profit, all within a relatively short period. This process is repeated perhaps several times a year to earn the renovator a substantial income from the profit of sales.
As much as this sounds easy in theory, there are many risks and pitfalls to beware of in this process. There’s no one simple answer to the question of the best way to flip houses. For this reason, it is important to plan your first investment house upgrade very carefully and to build up your house flipping skills over time, rather than being too ambitious in your first renovation project. It takes time to learn how to flip a house. It’s worth educating yourself about the best way to flip houses before you start your renovation project.
Some of the main risks of house flipping are:
However, some of the benefits of flipping houses are:
There is not a simple answer to how best to flip a house. People who successfully make a living flipping houses in Australia tend to be good all-around tradespeople with a variety of skills they can use and a ‘can-do’ attitude. Trade skills such as plumbing, carpentry and electrical skills will be the most useful for saving money on hiring other professionals. A qualified plumber can also install gas fittings, skills which are in demand when upgrading bathrooms and kitchens. Electricians also tend to be experienced in installing pipework to hold conduit, so can use those skills in plumbing and outdoor irrigation projects. Plastering, gyprocking and tiling experience is also very useful, as is landscaping and a knowledge of how to design outdoor living spaces and gardens.
Before deciding to buy an investment property which you intend to renovate and sell, it’s always worth working out how much you’ll be able to borrow so you have a realistic budget for your renovation project. Use this borrowing power calculator to work out how much a lender may be prepared to loan you based on your current income and liabilities.
However, in addition to servicing your investment property loan repayments, you will also need spare cash at hand to pay for the materials you’ll use in your renovations, for items such as new whitegoods or tapware if you’re undertaking kitchen or bathroom upgrades. Leaving yourself short of ‘working capital’ when upgrading a house could lead to a costly delay in being able to finish the renovation project and get it sold quickly.
It could be worth talking to your lender about using the equity in your home to help finance your property flipping project – with a top-up loan or a cash-out refinance both possibilities which may help you complete your project on time.
This will depend on whether flipping houses is your main source of income, or whether you do it as a side project. If you’re a full-time professional renovator, the income you make from flipping houses could be regarded by the tax office as your regular income, and be taxed at normal income tax rates. However, if you have another occupation, and renovate houses as a side-hustle, the profit you make will be regarded as a capital gain and you will have to pay capital gains tax on it. It’s important to consult an accountant or financial advisor to guide you as to how to structure your house flipping for taxation purposes.
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© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
