Flipping too costly?

Reality is the old addage...if it was that easy everyone would do it. If Coles could buy milk for $1 and sell for $2 then 50% margins would be the norm.Issues that limit it are taxes like stamp duty, legals and holding csts and market forces. Reality is a 20k reno must return 300% to break even.If that was so easy buyers would all buy.

Settlement takes 90 days mIn on buy and seĺl but with any work it takes longer often much much longer. So typical stockturn takes 1thrd a year Assuming immediate turn which wont occur. It is all risk and poor return.

 

It's Friday!?
It would be nice if numbers could be drawn with pretty pictures! The whole debit /credit thing still does my head in l like numbers but the ins and outs trip me up.

Yeah 150k to get things going and expected to be eaten up, Use for deposit and purchasing costs. So 80% better.
Hmm, but if the work takes say 4wks for the next one you'll be saving 8 wks (using my original numbers) "pay" to put back into the starting account

I realise something has to be chewing into your cash, which things I guess is what I'm after.

Plus if you get the properties well into cf+ that is also working for you

 

This is just living on equity.

 

Do 3 then sell one?
Plus working on the side for normal income, just not full time amount

 

Or buy them in Adelaide and hold long term

 

Didn't you notice The buy price?? Elizabeth and co

Might move to radelaide. I'll need a rental to live in while I do this

 

There is another thread on three sisters? (renovating/flipping) on PC they share the numbers on 3 projects/1 currently for sale)

Figures are Woeful/lean really, too much work for very little gains. This is also high end stuff which means more risk. The house for sale is in the Sydney market, that's what I mean by high risk.

MTR

 

Yup. But she does.

 

Do you know of anybody successfully flipping residential properties in Australia? IE getting a resonable profit for their hard work or is it only on those American lifestyle programs

 

not on PC, basically they renovate and hold because buying/selling costs will eliminate profits. Profits too skinny

Flipping or should I say renovating and on selling works well in rising markets, but even better when you don't need to renovate because the Trend is your friend. That's why I love booming markets, easiest way to make money and no need to get your hands dirty

 

The only benefit I have seen for a recently renovated house in a rising market is that it is more appealing for a buyer. Some buyers don't want to put the work in and want to buy a 'move in ready' house. Renovated can appeal if done right.

 

One of my clients has done 2 - first made about $20k after costs 2nd about $50k. Short time span with a bit of a reno.

But how much was due to the market rising and how much to the effort - we can only guess.

 

No - GST does not apply to existing residential homes. You cant claim the GST on the reno costs and cant charge GST on the sale. The ATO dont decide these things. Taxpayer are expected to lodge a correct return under self-assessment.

 

I see many who give it a crack...Here are the common mistakes:

• Timing delays between deposit and sale settlement is always at least 45 days each way
• Stamp Duty
• Selling costs - agent etc (They can market a quick OTP sale however)
• Council delays with DA etc...Long delays
• Weather
• Unexpected costs like whiteants and hidden problems
• No ABN....Naughty naughty
• Contractor payment reporting
• Claims under the Construction Industry Security of Payments Act etc

A benefit :

• Sale date for tax is not the contract date (like CGT) but settlement date

Other mistake I see is those who buy land thinking it will appreciate in value and they can profit without having to build. It can be a disaster sometimes as GST applies to the sale and yet the GST paid on the buy may be unable to be claimed. (developer land is usually bought under margin scheme).

 

Would be good to hear from someone who actually flips as a business.

 

I seen a client who buys renos holds for a while and then sells. This is how he makes his living.

 

12 months for the discounted cgt?

 

In USA no stamp duty or CGT, unfortunately that is a killer in Australia

 

Hmm, given this can be a big part of the costs, does this mean the ACT is the only place that flipping is sensible (given the ability to claim 100% of stamp duty in the first year and assuming the "income" earned to claim against is the flip sale price) ?

 

I know someone who buys a property once a year. Renovates from top to bottom not just cosmetic but structural as well. Waits a year, sells and starts again. It's more of a hobby but as others have said it's more about timing the market, controlling costs and waiting the 12 months to get the CGT discount.