The Reality of Flipping Houses

Dilleen Property Group 2022

Flipping Houses is a common strategy used by property investors to gain quick profits. The concept behind it is quite simple, you purchase a property, renovate it and then sell it. However, it’s actually not as easy as you think…

Here are some points of property flipping that you may have not thought of :

1. High Cost

The costs associated with this investment method are highly expensive. Not only do you have to purchase the property and pay for renovations (materials and labour), you will also have to make payments such as stamp duty (before owning the property) and pay for agency fees and capital gains tax when selling it. These expenses limit the profit you can gain from property flipping and in some cases, there may be no profit at all.

2. Time-consuming

There are a number of decisions that need to be made when flipping your property. This includes hiring tradespeople to do the renovating, selecting what type of renovation to go with and the types of materials needed. It is a very time-consuming process, having to check on the tradespeople’s progress every now and then and ensure that everything is up to standard. Some creative investors may take a more hands-on approach and renovate the property themselves. However, this method takes an incredibly large amount of time and there are no promises that the value of the property will be sold at the value of the amount you have put into renovating.

3. Unable to grow long-term wealth

A huge negative side to flipping properties is that it doesn't allow compound growth effects to take place over the long term. By selling your property, you are getting rid of an asset, which means that it’s unable to grow in value in the future. If you’re a creative investor who is highly interested in property flipping, it may be more beneficial for you to hold onto the property after the renovation, revalue it and rent it out. This will allow you to use equity and re-invest it in another property to build your property portfolio.

Conclusion

It is important to do your own research and find out what type of investor you are before diving into a particular style of investment strategy. If you’re a long-term investor aspiring to build your own property empire, this strategy may not be for you. A property is an inflationary asset that can provide you with rental income and tax deductions. The monetary gains that you make after selling your property cannot be leveraged and wouldn’t increase in value over time. If you require assistance or have an inquiry about what investment strategy to use, feel free to contact us here to learn more about our services and investment strategy.

Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.