How to Get Into Property When Prices Keep Rising

Graeme Salt

You are searching for your dream home but have consistently been beaten at auction, do you:


1. Give up, stay where you are and wait for real prices to come down


2. Look at more affordable markets


3. Think about flipping as a strategy to get you the home you want


 


All three strategies can work. I have dealt with the first two in previous newsletters. This month, I want to focus on the pro’s and con’s of flipping.


 


Flipping is where a property’s owners give it a quick cosmetic transformation to manufacture a price increase and then sell it for a quick profit – often they then look to buy another property and repeat the process.


 


But, given that stamp duty is payable with every purchase, often the most profitable way is to draw upon the increased equity in the refurbished property. Rather than constantly buying and selling, buying, renovating and then renting for yield is often the best way to go.


 


The extra value owners create by renovating the property can be used as equity to borrow more money from the bank and invest into the next property – maybe even that dream home you had previously lost out on.


 


 If property owners are to do this, however, it is important that they apply their limited resources where they get most bang for their buck. Improvements to bedrooms and bathrooms have the biggest impact.


 


However, there are times when it can all go wrong. Sometimes owners spend money where it has no impact. That expensive swimming pool may make a loss for example.


 


 Similarly, if you want to do the renovations yourself, be sure you have the skills; apparently one in five of us have bungled a home improvement job such that DIY disasters have cost Aussies $380m. Most of those who do build a property portfolio by improving properties use tradies to do the job. Certainly they get quotes to keep costs down. But the most important is that the job is done well.


 


From there, it is relatively straight forward to move toward the next property. All you need to do is contact your broker; armed with the increased equity in the property, plus an indication of the rent you can achieve, she or he will be able to arrange a loan for your next property.


 


As ever, if you want to discuss your home loan needs, please feel free to call me on 0457 755084