House flipping in Australia: How to do it right

Just finished watching The Block? Maybe you saw a couple of house flippers make half a million dollars. Perhaps you sat quizzically, pondering in your chair, and thought:

“You know what? That doesn’t look too hard. I reckon I could do that.”

The truth? You can do it (as long as you have the personal finance). And when you do, it’ll be a rewarding and potentially profitable venture.

But it isn’t as simple as it sometimes looks on the telly. It’s hard work. Filled with setbacks and hurdles.

We’ve had hundreds of ambitious Australians come to us for help with flipping homes. And we always give the same advice: Prepare, plan, and then prepare a bit more.

Still up for the challenge? We’ve compiled this complete guide. It’ll show you the rewards and risks as well as everything you need to know to make a start. Let’s get into it.

What even is ‘house flipping’?

Let’s get the basics out of the way first.

House flipping (real estate flipping, home flipping, property flipping) is one of many property investment strategies. It involves three main steps. Buying, renovating, and selling.

You find and buy a property (usually an undervalued property that needs repairs).

You renovate the property. This maximises its value and makes it more appealing.

You sell the property for a profit over your purchase price and renovation costs.

Together, these three steps form “the flip”. The goal is to buy a property in need of work for cheap. You’ll then fix it up to turn it into a welcoming home. You can then (if all goes well) sell it for more money than your initial property investment, plus the renovation costs.

House flipping is a profitable investment, should you get it right. But ‘getting it right’ isn’t necessarily straightforward.

You can encounter problems trying to find the right property. You can also come up against unexpected renovation costs. That plumbing problem you thought was a non-issue? Turns out the home needs a full replacement installation.

As such, you need to weigh up risk vs reward before you get involved in house flipping. Let’s dive into that topic.

Related:Where is the best place to buy an investment property?

The rewards and risks of house flipping

You now understand what house flipping entails. Time to figure out if it’s right for you.

Let’s start with the benefits.

The rewards

Rewards first. Here are three benefits to think about.

Profit: House flipping can be lucrative. It’s also a great way to generate a quick profit. That’s all, provided there aren’t any massive delays and costs you need to contend with.

Skills: As with any hobby project, flipping houses will build your skills. You’ll get some real estate investing experience. Plus a swathe of DIY knowhow. And a dash of learning how to manage projects and work with contractors. All very useful stuff.

Satisfaction: What’s more satisfying than turning a run-down property into a home ready for market? We can’t think of anything. Flipping homes is one of the most rewarding things anyone can experience.

The risks

We’d all love rewards without risks. But that’s wishful thinking. Here are three roadblocks you might encounter during the flip.

Volatility: You might have everything in order. But you’re still relying on the market to play ball. You might struggle to sell your property for as much as you’d hoped if the market dips. That can lead to a loss.

Costs: Almost all renovators encounter an unexpected cost at some point. Repair and maintenance costs add up quickly. You might end up spending more than you had initially budgeted.

Competition: Flipping properties is popular. You might struggle to find the right property if there are lots of other ambitious buyers hunting for the same deal. Patience is key.

Related: An in-depth analysis of the NSW property market in 2023

Is house flipping the right move for me?

Watching house renovation shows might make you think just about anyone can flip a home. And that’s partially true. All you really need is the money to invest. Still, having finances doesn’t always translate to investment success.

House flipping is rewarding. But it’s also risky. You need the right qualities if you want to do it right and increase your chances of turning a profit. Here are four we consider essential.

Money

Flipping houses in Australia is expensive. You’ll need solid finances to cover the initial purchase price and running costs. And don’t forget the cost of renovating.

And you’ll also need to have a good financial cushion. Unexpected costs are part of the game. You need a buffer to be able to take the hits as and when they come.

Renovation skills

Planning on doing most of the DIY yourself? Previous experience is vital. It’ll cost you a lot of money if you need a contractor to handle every part of the reno process. We suggest having at least some basic knowledge.

Already know a specific skill is beyond your abilities? Factor in the extra cost of hiring a contractor before you purchase the property.

Time

House flips take time and patience. Consider whether you have the room to commit to the project if your schedule is full fully. If you’re already working a full-time job and have a bunch of other responsibilities on the side you may decide flipping simply isn’t achievable right now.

Also, have a realistic timeline. Underestimating the time it takes to flip a home leads to nothing but disappointment. Renovating is often one step forward two steps back. It’s best if you’re ready for the long haul.

Market knowledge

This isn’t essential per se. But knowing the local real estate market can save you a lot of headaches down the line. Even having some basic business acumen can save time and effort. It’ll also (hopefully) open the door to bigger gross profits.

Related:Understanding capital gains tax on investment properties

Tips for every stage of the house flipping process

Ready to go ahead with house flipping? Congrats! There are three stages to the process. We’ll now look at each and explain what you need to know. We’ll also give some tips for each section.

The acquisition stage

First thing. You need to find a house to flip. Sounds like the easiest part. But there’s a lot that goes into it.

The most important bit of advice here? Do your research and plan carefully. This applies to every stage of the process. But it’s vital when choosing a property. Here are four things to consider.

1. Choose carefully

Pick properties that align with your budget and are in the right housing market, depending on your expertise. Our recommendation? Never go over budget at this stage. Stick within your range, as it’s impossible to predict how much renovation will cost.

2. Understand the area

Assess the ceiling cost of properties in your area. This is the maximum amount of money houses will sell for. If you need to sell a property for half a million to make a profit but no home in the area has ever sold for more than a few hundred thousand, you’re introducing a lot of unnecessary risk.

3. Inspect the house

Don’t buy anything before you’ve had the chance to weigh up the job at hand. Inspect every element of a potential property. Ensure it’s structurally sound and doesn’t have any foundation issues. Make sure the work required is manageable within your time constraints.

4. Plan before you buy

Factor in expected costs into your budget before you sign any dotted lines. Consider the contractors you’ll need to hire and where you can find them. Plan for any home renovations and make sure you have a contingency fund for unexpected costs.

The renovation stage

Your property is in the bag. You’ve paid off the deposit and are ready to start renovating. But where to start?

Renovating can be quite overwhelming. Here are four things to keep in mind.

Build a contractor network: Have a large number of reliable contractors on speed dial before you start renovating. The last thing you need is a serious plumbing fault and no plumber on-call to fix it.

Design first: Work with a design professional to survey the land and plan out the overall layout of the structure before you commit to any repairs. Create a blueprint before you start filling in the details.

Prioritise: Always start with the essentials first. Think of foundational problems and utilities. These are the core tasks that will take most of your time. It’s useless laying down a fresh coat of paint if you’re going to need to rip apart a wall to tackle an electrical fault.

Put the buyer first: Consider what the buyer will be looking for throughout the process. Think practicality, functionality, and style. Try not to let personal ideas get in the way of your goal. Make every decision one that will ultimately help the buyer. This is what will help your property sell faster.

Remember, Renovating is rarely straightforward. Be prepared for challenges and ongoing work. Keep an eye on ongoing costs. Stay focused, but be patient. The right mindset can make all the difference.

The marketing and sales stage

It might feel like the hard work is done once you’ve renovated. But there’s still one last task to complete. Marketing the house to turn a renovated property into a flipped home. Here’s some advice.

1. Stage the home

A professional can help you stage the space so it looks attractive to potential buyers. They will know how to get the best out of your space. This will help the home sell faster and can even help you make more money on the sale.

2. Consider property tax

You’re liable for capital gains tax (CGT) when you flip a house in Australia. The amount you pay depends on your profit as well as how long you hold onto the property before selling.

3. Work with a real estate agent

Marketing the property and arranging viewings are two tasks best left to experts. Work with a realtor who can emphasise the benefits of your property and help to get it off the market.

4. Close the deal with a solicitor

Hire the right solicitor to handle the negotiation stage with buyers. They will ensure all your paperwork is in order and read through paperwork from your buyer to make sure all the details are correct.

Related:A guide to buying property in NSW

The bottom line

Successful property flipping is never easy. In reality, it’s often the opposite. But it doesn’t have to be daunting if you take the time to prepare.

Plan ahead. Budget properly. Have everything in place before you begin, and remember that setbacks are just part of the game. With the right strategy in place, you'll be able to join the ranks of house flippers in no time.

How DiJones can help?

DiJones has supported Australia’s property owners and property buyers since 1992. We’ve seen the triumphs and the turbulence that comes with flipping. That’s why we want to help every ambitious Australian do it right the first time.

Want some extra support? Contact us today to find out how we can help you get a bigger return on investment as you start flipping properties. We’ll be more than happy to help.