House Flipping in NZ: 5 Expert Tips

What is house flipping?

House flipping is an investment approach that typically involves buying undervalued properties, renovating them and then selling them on at a profit. The aim is generally – theoretically at least – to complete this process quickly and to spend as little as possible on the renovation in order to maximise profit before moving on to the next flip.

When you consider the investment of finances, time and emotion that can be involved, flipping houses may not be for everyone. But for some ambitious Kiwi investors and renovators, the challenge and potential profit are significant motivators.

If you’re considering tackling a renovation project for profit, there’s a lot to think about: finding a suitable property, financing it, renovation costs and more.

1. Do your research

There are going to be high emotions and stress levels no matter how big or small your renovation, and if you are committing hard-earned dollars to a project, you want the best results.

To alleviate some of the stress, make sure you have a very clear budget and stay on top of it from the get go. Ask your contractors for their best hourly rate and their professional estimates of time and cost before you embark. Shop around till you find a team you feel comfortable with and be upfront about your expectations and budget with them.

2. Only spend what you can afford

If you expect to make a short-term return, it means that you are going to have to buy well. That means walking away from any property that is not under-priced. Don’t get caught up in an auction frenzy. Wait for the next one.

If you are renovating, get your costings right and make sure of planning approvals. Understand the condition of the property so that you don’t find unpleasant surprises as you go.

→Related article: How Much Does a Home Renovation Cost?

3. Be realistic when taking out a loan

When considering the financing required, don’t feel that it doesn’t matter because you won’t be repaying the loan for long. Assume the worst – that you won’t be able to sell for the price you want, and will have to hold the property.

Consider getting a loan with a rate at the low end of the market. It must have the flexibility to be repaid early, which will rule out most fixed rate loans. Of course, you must be able to afford the repayments, or the bank will make the decisions for you.

4. Be prepared for the work and challenges involved

The only way to make a significant profit is to undertake structural renovations to a property. For example, adding extra living spaces, modernising it, adding an ensuite, making another room or adding an additional level.

This type of work requires professional skills. It involves builders, architects, development planning and permits. However, spending a lot of money on a renovation can lead to overcapitalisation. Be aware that there are ceiling prices on homes in most areas; people aren’t going to buy the most expensive house on a street just because you’ve done it up.

5. Keep a close eye on your costs

Keeping an eye on costs when renovating a house is crucial to ensure you don’t blow your budget and can make a profit when you sell. Doing the majority of renovations yourself can help cut down expensive labour costs. Try to only hire tradies for jobs you can’t do yourself, e.g. electrical work or plumbing.

To keep costs down, make sure you’re only buying what you can afford. It might be best to start in the outer suburbs where there’s more potential to grow – maybe a house that needs some TLC that you can renovate yourself without spending too much and blowing your budget.

→Related article: How Much Does a Home Renovation Cost?

Risks to be aware of

As well as the points already covered, there are some other potential risks that may be worth considering when it comes to renovating for profit. These risks associated with flipping houses can include:

1. Market conditions

If house prices across the market fall, selling your property on at a higher price in the short term may be a challenge, even if you’ve improved it cosmetically or structurally.

2. Interest rates

Rising interest rates could mean higher loan repayments and pressure on your budget.

3. Having trouble selling

If you need to hold onto a property for longer than expected, the costs can quickly mount and eat into any eventual profit you might make.

4. Unexpected costs

Unanticipated renovation costs can derail even the most carefully planned budget. Having a building inspection carried out before buying a property can help you avoid some nasty surprises.

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About the author of this page

This report was written by Canstar Content Producer, Caitlin Bingham. Caitlin is an experienced writer whose passion for creativity led her to study communication and journalism. She began her career freelancing as a content writer, before joining the Canstar team.