My investment strategy is renovations with the intent of selling or flipping for a profit. Given Western Australia’s bleak economic climate and property price growth as well as the tightening of the lending rules by APRA, is this still a feasible strategy? Is there anything I could be incorporating into my renovation strategy to cater for the current environment? Thanks.
Flipping is generally not an exceedingly profitable venture in Australia for the most part, generally teh rosey figures some people provide are in markets which are rapidly rising so it masks the true profitability.
You’ll be hard pressed make a reasonable return in a flat/declining market through a reno/flip strategy, or will be two steps forward, one step backward compared to growing a profitable portfolio through retaining your renovated investments and releasing the equity.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thanks Corey Batt. If one was to renovate and retain to release the equity, how does this strategy translate to wealth creation? At some point, the banks will say enough is enough because I woud have reached my serviceablity and LVR limit.
My investment strategy is renovations with the intent of selling or flipping for a profit. Given Western Australia’s bleak economic climate and property price growth as well as the tightening of the lending rules by APRA, is this still a feasible strategy? Is there anything I could be incorporating into my renovation strategy to cater for the current environment? Thanks.
As mentioned above it is tough to make the numbers work consistently.
I would see market choice as 1 factor, APRA as a completely separate issue.
On the APRA issue – they haven’t made it harder for people to get PPOR home loans, and for flipping these are your buyers. So no issue there if you appeal to the ppor market. It might be harder for YOU to get your loan but that is up to you and your broker to solve.
On the market – I would say it is possible to profit in a flat market but it must be buoyant enough to have buyers active. Also most suburbs aren’t profitable so location choice is critical.
Once you solve that there is house selection, which is also very important and along with suburb selection will make or break the strategy.
Lastly, dont pay too much!
BuyersAgent | Precium
http://www.precium.com.au
Email Me | Phone MeSouth Coast NSW Independent Buyers Agent - Wollongong to Batemans Bay and Regional NSW. DOWNLOAD OUR FREE 14 POINT PROPERTY BUYER'S CHEATSHEET to avoid painful mistakes at precium.com.au
Thanks Corey Batt. If one was to renovate and retain to release the equity, how does this strategy translate to wealth creation? At some point, the banks will say enough is enough because I woud have reached my serviceablity and LVR limit.
If you buy well it shouldn’t be a problem.
We have mainly bought, reno’d and rented. We buy cheaper properties and do a complete reno. We have typically increased equity $3 for every $1 spent. And rents have risen, making them CF neutral to CF+ so you are in a better position than before you started so why would the bank say no more?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
