It may seem like an easy proposition. However, you need a keen eye to know which renos to make a decent project, and which people to hire to ensure your flip won’t flop.

House flipping involves an investor buying a property, renovating it, and selling it for a profit. This may make you a great deal of money, but it’s not as simple as buying the cheapest house on the market, giving it a few touch-ups, and expecting buyers to flood you with offers.

If you’re keen to get started with this kind of project, then how much you need for your house flip to be successful depends on a lot of factors, such as:

  • The property’s purchase price
  • Stamp duty
  • Administrative fees
  • Legal fees
  • Renovation and contractor expenses
  • Your buffer or emergency fund
  • Other misc. costs

Considering these fees may help you have a rough estimate of how much you need. Once you have accounted for all costs that buying a house and flipping may entail, calculate how much profit you may be able to get. If you think the figure is favourable, then you can go ahead and start planning your flip.

Planning a house flip

House flipping needs meticulous planning and research to make it work. One wrong move could mean losing a lot of cash, so here are a few steps to consider when starting your house flipping journey:

  1. Research the market. Before purchasing a property to renovate and flip, make sure to scout the market. Consider looking at various properties on the market to see what types of properties are in highest demand, and what finishes and fixtures are popular in the area.

     

  2. Go shopping: When you’re armed with all the knowledge of what you would like to achieve, make a checklist of the features you want your property to have. For example:

Property must haves
  •   Two bedrooms, with potential for a third
  •   Two bathrooms
  •   Swimming pool/no pool
  •   Front yard/backyard/courtyard
  •   Garage for two cars
  •   Near a Central Business District

This may help you narrow your search and save you time. If a property doesn’t tick most of the items off your checklist, then move on to the next.

Understanding the average selling and buying price in your prospective area may help you with your search. Check out our Top Suburbs page to monitor house medians, capital growth, and demographics.

  1. Keep a budget. Record the estimated budget for the flip. Make sure your investment does not go way beyond your estimate. Have a price range for purchasing a house, repairs, renovations and selling.

A sample checklist may look like this:

House Flip Budget Tracker

Item

Estimated Cost

How much I have saved for this

20% deposit for a $500,000 house

$100,000

100,000

Stamp duty and other taxes

$5,000

$5,000

Legal fees

$2,000

$2,000

Renovation budget

$300,000

$300,000

Budget for employees

$10,000

$10,000

Buffer

$10,000

$5,000

A checklist that you return to regularly may help you keep track of your spending and prevent you from going overboard. It may also help you evaluate where you need to allocate your money the most and how much you still need to save. It may also help you analyse whether you would make a profit from your flip.

  1. Assemble a good team. Having a great renovation team is essential in house flipping. Contact a reputable contractor and inspector to assess what your property needs. A contractor will also give an estimated cost of the repairs. A good real estate agent and mortgage lender (should you take on a loan) may also be helpful when flipping a house.

When hiring a contractor for your flip project, consider the following:

  • Create a list of what you need to be done. This may include specific jobs you want to do to the property, the people you need to hire to form a renovation team, and other matters you need to process before starting your project.
  • Negotiate payment term. Try negotiating payment terms; ask if you need a deposit upfront or payment on the day. Keep in mind that you also must budget your cash flow based on this.
  • Make sure the contractor is insured. Ask the contractor for proof that they are insured. An insurance policy may cover public liability, property damage and other accidents that may occur to you or your property.
  • Ask about their history. Ask the contractor for references or examples of their past works, as these make evaluating if they would be a good fit your reno project a lot easier.
  • Ask for timelines. Discuss the timeline of each reno project with the contractor so you would have a rough estimate how long the project will take, and when you could expect to list your property for sale on the market.
  • Ask for the contractor’s license. Check if your contractor is accredited. Visit this government website for a list of accredited contractors.
  1. Have a professional inspection completed. This will help you pinpoint some of the more hidden issues a property has. An inspection report may set you back $300, but it’s generally tax deductible and gives you peace of mind that the issues that need to be fixed are achievable, and there are no nasty surprises.

Consider an inspection before purchasing the property; you don’t want to end up spending thousands of dollars fixing issues that were undisclosed during your personal inspection.

To know more about property inspection in your state, visit the following government websites:

Once you’re all set with your property and there are no major issues found, plan what reno projects you would like to make. These projects should be for prospective buyers and do not necessarily have to conform to your taste. Some reno projects to consider are:

  • Kitchen. The kitchen is the most popular room to renovate, according to Houzz. The median spend for a kitchen reno in the past year was $20,000, but you may be able to achieve upgrades for a fraction of this price.
  • Bathroom. Consider updating the tiles and showerheads. Replace door handles and toilets while refreshing the wall paint for an instant upgrade. The average cost of a bathroom renovation is $17,054, according to the Housing Industry Association, but you don’t have to spend that much to make an impact. Upgrading the bathroom not only adds appeal, but it can add value, too.
  • Lighting fixtures. Lighting affects how your property will appeal to buyers. Consider replacing old lighting fixtures with new ones to open your rental’s space. The average cost of lighting installation is around $85-132 per hour for an electrician, while the cost of lighting fixtures themselves range from $15 to $300, according to HIREtrades.
  1. Price your home correctly. To have a better grasp of how much your property is valued, consider having a valuation done. It may cost you from $200-$600, but a valuation report may help you price your home correctly – and again, the fee is generally tax deductible.

You may get a property valuation from one of the following major companies, or a smaller independent valuation firm:

Reno rules

House flipping also involves complying with renovation rules in the state or territory where the property is located. You must acquire all necessary council permits and pay all fees that renovating may entail.

In general, your reno must meet basic requirements for health, safety and structural soundness set out by the Building Code of Australia. Approvals are required for changes made to the structure or shape of your home, including new additions or removing walls or windows.

Some repairs and renovations may not need approval such as painting, cabinet installation and replacement of existing windows or doors.

It is your legal responsibility to obtain building permits required. To know more about renovation rules in your area, visit the following government websites:

Flipping a house for profit can be risky, but when done right it could make money. It takes hard work and a lot of planning to succeed. Understand what you’re doing before taking the next steps and learn from experienced house flippers and avoid the mistakes they made. Make sure to consult experts to know more about house flipping and discuss your business plans.