What Is A Property Flip?

A property flip is a property investing strategy where you sign a contract to buy a property and then sell your interest to a third party before having to settle or close on the deal.  A property flip is an opportunistic purchase where you act as an intermediary in the sale of the property.

3 Ways To Make A Property Flip

1. A Property Investor may find a property that he/she knows to be undervalued. The investor can simply swoop in and buy it at a "bargain" and then turn around and sell the property for its true value. If this occurs, the investor probably had an information advantage.
2. The second way to successfully execute a property flip is through repairs and renovations. An investor buys a property in need of some work. While the investor owns the property, he fixes the house and may update some aesthetics. This makes the house more attractive for potential buyers and increases its appeal. Of course, the investor must be able to make a profit after subtracting his costs for repairs from the new selling price.
3. The third way to flip a property takes time and capital. This entails buying a piece of land in an area that is rapidly appreciating. The investor simply purchases the property, waits until he believes its market value is as high as it will go, and then sells the house for a profit.

Why Property Flipping Does Not Work

Property Flipping is a form of Property Speculation and is not classified as Property Investment.  While Property Speculation offers the opportunity to make a quick dollar, it doesn’t work well in a flat or declining market.  Property Flipping is a highly speculative and risky form of property investing.  A smarter way to invest is through purchasing and holding Positive Cash Flow Properties.

What are the critical success factors for Property Flipping?

The critical success factors in a flip are:

1. Finding undervalued properties
But in reality finding cheap properties, especially in a 'hot' market where prices are rising daily and properties are selling quickly, is going to be difficult.

Like most creative real estate investments however, the time that you allocate to sourcing opportunities will have a direct impact on your success. If you're already stretched for time because you're working long hours in a job then flips, won't feature greatly in your property investing portfolio.

On the other hand, if you have lots of time then it may only take one or two deals to potentially replace your normal salary.

2. Finding someone to flip to
Your role in a flip is to dispose of your interest in the contract to another party before having to settle on the property. In other words, you are acting as a private broker by seeking to pass on the property to another person and receive a commission in the form of the difference in your buy and sell price.

While you might be able to locate a cheap property, your eventual success remains dependent on finding someone who wants to buy it off you.

That's why it's critical for flippers to maintain a database of investors who are time-poor and are happy to pay for you to bring them deals.

3. Affordability
If you can't flip the property before settlement date then you'll have to buy it. This means that you have to be conscious of the financial impact upon your wealth creation plan should this happen.

4. Lease-option profitability
Flipping in Australia is not as straightforward as it seems to be in the United States. There are three issues that I can immediately think of that will impact your lease-option profitability. They are

1. Stamp Duty

   You may find that there will be double stamp duty payable on a filp.

   While there may be ways around this, such as buying an option to purchase the property rather than agreeing to buy the actual property, the legalities are complex and you should consult a lawyer before setting up the flip deal.
2. Licensing Issues

   Because you are selling a property that you don't technically own and making a profit as a result, it's likely that you are going to need to be a licensed real estate agent to complete a flip.

   If you're not a real estate agent then it doesn't mean that you can't do it... you're just going to have to operate under the auspices of someone who is. This means that you'll need to pay some kind of fee to ensure you are operating within the law.
3. Capital Gains

   You should also be mindful that if you buy and sell something that triggers a capital gain in less than 12 months then you will not be eligible for the 50% Capital Gains Tax discount that individuals are otherwise entitled to. See your accountant for more information.


Learn more about Property Flips with our:

On this FREE DVD you'll discover:

• How to locate an area where real estate prices are set to skyrocket!
• The secret question to ask real estate agents that gets you the hottest deals... before anybody else!
• How a real estate investor received a $90,000 “cash bonus” from the tax office… and how you can too if you know this insider real estate secret!
• How to place a deposit on a property... even if you don't have any savings!
• The #1 biggest mistake most real estate investors make before signing the contract... and why you MUST avoid it!
• The no-lose way to buy real estate for FREE!
• How to avoid the biggest pitfall when screening a new tenant!
• The absolute best way to instantly negotiate a lower price from the seller!
• A hidden area of the tax code that 60% of real estate investors miss deductions on... and cost themselves thousands of $$$!
• How to get tenants into your property... without reducing rent!

And . . the best part is... you don't even need any previous real estate investing experience or prior knowledge.

Warmest Regards

Hans Jakobi – Your Wealth Coach®