The process of buying something then selling it at a higher price before you have to pay for it is nothing new in most business models, but what about with houses?

Getting control of a property that needs a renovation, a few repairs or a refurbish is usually very easy to do as most investors and new home owners are not too keen on the hard work side of buying houses.

Flipping is a great way to get your portfolio going very quickly. You can make serious cash if you get into the right opportunities and can move fast when they arise. There are some pitfalls that I know to watch out for and I am sure there are more that I have not thought of.

You need to get networking with agents who are prepared to bring you deals where you think you can get a deposit down fast to secure the deal. You then need to get a buyer to ‘flip‘ the property to.

Here is how a Flip works

1. You get a call from an agent or you find a suitable property below the market value of similar properties in the immediate area.
2. You get a contract to sign from the agent or owner. Do not go unconditional just yet!
3. You advertise for a buyer to buy the house from you just below market value.
4. Get commitment from them and a deposit.
5. Get your new buyer to sign an unconditional contract to complete the purchase.
6. You buy the house at your price.
7. The new buyer buys at the price you negotiated.
8. You make the difference minus the tax implications.

Essentially you will find that there are some risks involved and they need to be attended to before going out and offering or buying anything. Property investing comes with risk and mitigating or understanding these risks enables the investor to get closer to the rewards.

Flipping houses for profit in some states creates stamp duty implications as capital gains tax is payable at the applicable rate for the investor. In the event you cannot find another buyer straight away you are obligated to buy the houses as you signed a contract for sale.Your position then would be to withdraw from the contract and therefore lose your deposit.

I suppose in the event you have to settle on something you cannot move for one reason or another you might be able to do a small reno, value add or repaint and then list it for sale using either traditional methods, vendor finance or a 20% carry back.

I have been involved with a Flip in the southern suburbs of Brisbane and did not sleep for the days around the settlement. Investors need to have nerves of steel and plenty of guts to make this work for them.

As always your accountant and solicitors will have you better prepared for the implications in your area and will have to direct you in the correct way to do Flips - with Success!

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