We were reminded of this again during the week when we had the opportunity to look over some interesting data from Corelogic which looked into the success rates of property investors who are involved in flipping property. For those who may not be familiar with the term, flipping refers to buying and selling a property within one or two years, and has gained attention thanks to a few of the “Reality TV” programs that focus on this type of activity.
What may surprise many readers is that even though our property market has enjoyed tremendous rates of growth in median values over the past few years, this is not a guarantee of a profit when you buy and sell in a relatively short period of time.
In fact, the figures from Corelogic showed that one in every ten properties flipped by investors last year did not make a profit, and that was BEFORE the costs of buying and selling were taken into consideration! Yes, this was purely assessed on sale price versus purchase price! The raw numbers showed that 89.1 percent of homes resold within one year made a profit, whilst that figure increased marginally to 89.9 percent when the property was resold within two years. So, keep in mind that the proportion of loss making flips would be substantially higher once expenses are taken into account.
These are national figures, so the success rates would obviously be better in areas where property prices grew at higher rates, but the overall message remains the same.
Just because you see a TV program that suggests that a couple can transform a property into a profit-making machine with creativity and hard work, doesn’t actually make it a foregone conclusion in real life.
If you are considering getting into flipping property, or even if you are looking at purchasing for the longer term or selling after completing some renovations, don’t be shy about asking for some experienced and informed advice. You can call us any time on 9390 8333.
James Hatzimoisis & John Aaron Nakic
Directors – Barry Plant Real Estate
Taylors Lakes, St Albans & Caroline Springs