Cherie Barber on flipping property in a cooling market
Can you still make money flipping property? Absolutely.
I have students all across the country who are making great profits with just a cosmetic renovation.
But you have to be very strategic about the property you buy and how much you spend on the renovation, and accurately forecast the price you're likely to get when it's all done.
A much safer strategy is to buy, renovate and hold - that's the one I've been recommending to my students for at least the past five years.
It gives you the benefit of long-term capital growth, the instant uplift in property value you get through renovating and rental income over time.
If you can hold for 10-plus years, you'll inevitably ride out the highs and lows that every property market goes through but come out ahead at the end.
Flipping works particularly well in a rising market, if you know what you're doing. You benefit from both your renovation and a nice capital growth spurt.
That helps to offset costs such as stamp duty, acquisition and holding costs, selling costs, any taxes, etc.
It gets much trickier in a soft or falling market, as we've seen in Perth these past few years or as we're seeing in Sydney right now following the boom.
If you then compound the problem with a poor property choice, or overpay, or overcapitalise on the renovation, you could be in trouble.
The market conditions will not be forgiving of mistakes. You have lost that nice safety buffer you have in a hot market.
The buy, renovate and hold strategy means you're largely insulated against market ups and downs.
They're only paper losses or gains. Meanwhile, you increase the value of the property in the initial renovation, the rent rolls in and you'll benefit from capital growth in the long term.
It's that old saying: time in the market is a surer bet than trying to time the market. My most important piece of advice, however, is to buy astutely.
I always say that 50% of the work you do should happen even before you purchase a property.
If you buy a dud or pay too much, then you've made it incredibly hard for yourself to make the numbers stack up, regardless of what the market is doing.
Flipping works in all property market cycles but you've just got to know how to handle each cycle. Great reno profits can sometimes be easier to make when the market is at its worst.
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