Figures compiled by CoreLogic show that the percentage of properties owned for less than two years—which indicates flipping—has risen in the past few years. This trend is riding on the back of the property boom in many capital cities.

House flipping is a quick-profit strategy wherein investors purchase real estate at discounted prices. The property is renovated in order to sell at a higher price. Flipping can be a very lucrative profit strategy if the housing market is doing well. Investors favour buying older and foreclosed homes because they can be acquired fairly cheaply, which in turn increases the potential profit. While contractors are sometimes used to do the upgrades on the property, experienced house flippers will do most of the work themselves.

Flipping a Yarraville home for a profit

Melbourne couple Adam and Lisa Dixson purchased their fourth investment property, a home in the suburb of Yarraville, in late 2014 for $771,000. The home had been purchased from a deceased estate and had been declared uninhabitable by the local council.

After months of painstaking renovation work and enduring personal discomfort (including cooking on a public barbecue in a park across the road because the kitchen was unusable), the Dixsons were able to flip the home this year for $1.615 million.

Instead of resting on their laurels, the couple is eagerly looking for their next home to flip. They’d originally planned to live in the Yarraville home once the renovation was complete, but realised that Melbourne’s house prices were stronger than expected.

“This is the house we were going to stay in, but we saw where the prices were and thought maybe we can flip one more,” Lisa said.

House flipping isn’t for everyone

According to Cate Bakos, an independent buyer’s advocate, the flipping trend was becoming popular in large cities, like Melbourne, where prices were not growing as rapidly in some areas than they were in others.

“I am seeing a lot of flipping, and the two main drivers appear to be the moving markets and the prevalence of do-it-yourself renovation shows,” she said. “The shows seem to have really rocketed people’s enthusiasm for doing this kind of work ­themselves.”

On the other hand, Bakos said that house flipping was not suited for every property investor. “In the majority of flipping cases, it’s the moving market which creates the value, not necessarily the value-adding that people think they can do,” she said.

“I’m always cautious about it…a big part of my job is to have people look out for the risks. I’ve known people who have put their heart and soul into [house flipping], and then there’s other people who sell houses they’ve owned for a short time and made good money out of it.

“You also have to realise that there are cost blowouts from time to time. Thinking you can just put an Ikea kitchen in and make money is naive.”
 

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