Flipping houses?

[KitKat]

I have read about some people who make a good living out of buying houses, doing them up and then selling them for a profit?

My brother is a builder and we have been thinking of doing this for a while does anyone here know of anyone that has done it and what we need to be made aware of? is it profitable?

[Brendan]

KitKat,

I posted a similar question in another forum and this is what one of the guys there had to say;

They purchased of 2 bed units for $60K (pre boom, I guess this was 96 ish) and had a standard reno plan -

a) repaint throughout (cheap and nasty using existing carpets as drop sheets)
b) change all doors for flash panel type in gloss paint with new door hardware
c) swap out cistern and pan for full porcelain (budget) dunny
d) new stove in kit
e) new carpets to replace the drop sheets

Would take 2-3 weeks and a couple of ute trips. He would re-list at $110K and consistently achieve high $90's. The market at the time was first home owner, dare I say lazy and uninspired, and he capitalised on their naivety. Basically he used it to earn 4 or 5 times a trades income even after CGT etc.

Don't think the current market anywhere supports such a profiteering approach, 'cos everyone knows property can be a goldmine in the right circumstances, even if they've been living under a rock http://www.invested.com.au/forums/images/smilies/smile.gif My worry with such a project now, other than the much skinnier profit margins, would be how much competitor product might get dumped on the market when you're ready to sell.

Hope that helps.

[HWT]

We are extremely tempted to flip our current IP (the project that is sucking all our time and money right now and delaying the start of our computer sale business) as it would be extremely easy to double our money, but unfortunately we don't have enough cash to finish it to flippability standards - we have enough to complete the internal reno but not landscaping the grounds and subdividing the block. All the council approvals would take quite some time anyway so it will be slow.

Looking like it will be rented out for minimum of a year before we are in a position to subdivide and sell, but if we get a good tenant that's in it for the long term or the rent ends up being much higher than we anticipate, it may be worth holding, and then we can subdivide and landscape with the tenant there, if they don't mind all the noise and mess for a bit.

[Brendan]

HWT, I guess if you can afford to hold it for another 12-18months with some tenants in, then throw some more money at it to prepare it for selling could be a good way to go given the current ups and downs in the markets right now.

That might let you focus a bit more on your computer business.

[HWT]

Yes, that was the idea. Its also unfortunate that where most of our customers will be there's absolutely no commercial real estate for rent. They have broadband there too, we don't. Thinking of putting out an ad looking for a commercial sub-let situation aftter we're done with the house so we can use that as a base for the computer repair gig, and also as a studio to work on Plan A.

[jacylnong]

Heya,

BF's a developer and his brother does the business you are saying in Malaysia. Very profitable.

All they do is buy a run down house, fix everything up and mark the price up (usually by 10-20%).

Be careful to know what how to buy, its location as well as how much is it to renovate or fix everything to make sure your profit covers up to your expense! :)

[lelah_jones]

Just hinking of putting out an ad looking for a commercial sub-let situation after we're done with the house so we can use that as a base for the computer repair gig.

[HWT]

Heh. I've been quoted by something bottish.

We didn't flip. We're trading down in February/March to a bigger, cheaper house. The original house has close to quadrupled in value since we bought it.

[Brendan]

Heh. I've been quoted by something bottish.

We didn't flip. We're trading down in February/March to a bigger, cheaper house. The original house has close to quadrupled in value since we bought it.

Interesting.. did you trade down for that reason, to release the extra funds that the house increased?

Or because you needed a bigger house?

[HWT]

Bit of both - needed to release the funds to *build* a bigger house, but we still need a bigger house anyway while we're building. The one I'm interested in is 25km from my current house, which is why it is so cheap. If its not still for sale in March I guess we rent for a few months instead.

[abd]

I know of a few people that have done this. They have brought old places in really good areas, knocked them down and re built. My mate picked up a place in Campbell in Canberra for $410,000 back in 2001, knocked it down, spent about $300,000 building an awesome new house and sold it for $1.2 Million.

I guess if you have the builders behind you and some decent cash, you could do really well out of doing this.

[Life Master Now]

Yeah, this is how i got started after just property investing for five years.
Well, my journey doing single story house renovations was profitable enough that now I am a property developer in the west and northern suburbs.

Lessons i can pass on:
- It certainly gave me great experience dealing with many builders and trades people, insights on really how the industry works and 'building' some fantastic relationships with them.

- The relationships with the builders went so well that now they also do house and land packages for me....again another topic to talk about!

- There are always deals to be found so that will never be the issue. You will eventually learn where to look, even getting big contacts like land developers.

- However, i guarantee there will be many challenges as there are many areas where you simply just don't have full control over so its critical you have some experienced builders with good project managers that are open to ideas.

- To fast track my process was i got other investors to joint venture with and share the 'finance' requirements.

-As you really start to do a few projects at a time, managing your builders, architect or draftsman, solicitors, banks and especially your cashflow will be the key.

- I believe that if this is your journey then go for it. Even with all the obstacles you'll face, just be committed, keep on learning and growing.

- In my case, now I've got experienced builders with me and at times we also joint venture on several projects.... Oh did i mention the great profits! :)