Buying and selling your investment property quickly – otherwise known as flipping – can be a fantastic way to see a decent capital gains profit within a few months of purchasing. However the opposite outcome – losing large amounts of money, is also a distinct possibility if you rush in headfirst without knowing exactly what you're doing.
Such an eventuation could spell disaster for your investment loan, leading to negative equity and all sorts of other finance debacles. On that note here's a few handy tips to help get you started on the road to speedy capital gains and smart property investment.
Jul 6, 2016 at 2:46pm PDT
Location is key
Buying the right investment property involves a myriad of different considerations, each with the potential to render your purchase a Hindenberg-sized failure or a high-flying success. The first and perhaps most important thing to consider is location.
Have a close look at the suburb, including its past rates of property value growth, the demand for property in the area and the current average price. After doing so you'll see that certain areas have excellent growth prospects while still being affordable, making them perfect for investment.
The first and perhaps most important thing to consider is location.
An example of one such suburb is Bemboka in the Bega Valley of NSW. This area sits around 8 hours driving from Sydney and sports an incredibly low median house price of $284,933 according to an NAB report compiled using Corelogic RP data.
Despite its low median price, the suburb boasts an insane 2015 growth rate of 49.0 per cent.
This means if you bought a property here worth $300,000 in 2014, then sold in 2015 you could have made a capital gain of nearly $150,000 in one year!
Buy low end
If you're looking to buy and sell a property quickly the first thing to consider is if demand for it will be high enough to do so. A number of factors may influence demand, but a good place to start is by purchasing a home which is affordable to as many people in the area as possible.
This claim is supported by Corelogic data which states that over 53 per cent of residential properties have an estimated market value of less than $500,000, a value that should be obtainable for the average Aussie home buyer. As an added bonus this may lead to a pleasant surprise when working out how much your mortgage repayments will be.
Jun 2, 2016 at 4:31am PDT
Focus on cosmetic renovations
A Housing Industry association report has revealed that over the last 10 to 15 years the number of people renovating themselves, then on-selling for profit has increased markedly. The reason for this is simple – DIY can be cheap yet still net fantastic results. While a new bathroom or kitchen could certainly add value to your home you may not be able to do these yourself, meaning you'll need to hire and pay professionals.
If it's possible to DIY, applying a lick of paint, fixing small cracks and or holes in walls and even erecting a new fence, can make your property more desirable to buyers. These improvements should also be relatively cheap, while helping to increase the potential sale price of your property and net you a tidy capital gains profit.
The number of people renovating themselves, then on-selling for profit has increased markedly.
Make sure your finance package is suitable
With so much to consider when investing, one of the most important considerations can fall by the wayside – your finance. The structuring of your investment loan and the product that you choose can all have considerable influence on the profits you reap from capital gains and the eventual success or failure of your investment.
Instead of shouldering the load by yourself, let Mortgage port use our extensive industry knowledge and personalised services to help you into the perfect loan for your situation. Get in touch today!