‘Flipping’ is a term used to describe short term property trading; a buyer purchases a home with the intent of reselling the property in a short time frame (generally one or two years) for a profit. ‘Flippers’ aim to make their profit either by buying undervalued property and reselling at a higher price, buying property at market value and riding the capital growth curve, or by adding value to the property in some way (renovation, subdivision, development approval etc).
While there are many examples of profitable flipping, it’s important anyone considering this strategy understands the costs involved. Transacting real estate is an expensive exercise. Successfully flipping a home involves more than simply selling the property for more than it was purchased for. In order to make a profit, Flippers will need to recoup their transactional costs such as stamp duty and conveyancing, as their selling costs such as marketing and real estate agent commission. There is likely to also be interest payments on the debt as well as capital gains tax on the profit.
When housing markets are running hot, it makes sense that flipping would become more popular while when a market is weaker, owners are likely to have to hold onto properties for longer in order to return a profit.
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