Flipping homes for fast profit is no longer a quick fix as renovators face budget blowouts.
House flippers hoping to turn a fast profit from the red hot property market risk being burnt by budget blowouts and lengthy delays as the construction industry races to keep pace with huge demand for home renovation projects across the Coast.
The popular investor strategy of renovating and selling within a set timeline for a handsome return has been thrown a curveball by rising material costs and tradies already juggling an oversupply of work, according to Herron Todd White’s monthly review.
“The main pitfall in renovating now is if there is a change in market conditions and buyer demand falls, price expectations on the finished product may no longer be achievable.
“This may lead to financial hardship for the renovator if the sole aim was to borrow and flip the property for a profit,” HTW director Janine Rockliff said.
This four-bedroom home at 76 Nobby Pde, Miami has been renovated in popular coastal style. It is marketed for auction by Justin Haynes of Amir Prestige.
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Low interest rates and government stimulus including the HomeBuilder grant have tempted many home owners to take on fixer-uppers over the last year, while more time spent at home has put the focus on improving living spaces.
“Getting hold of materials is a big challenge with many projects started and finish times being blown out dramatically,” Ms Rockliff said.
Real estate agent Conner Malan, of Ray White, said investors who properly staged and marketed property for sale were making good profits without the risk of flipping.
The owners of this derelict home at 24 Yacht St, Southport planned to rebuild but instead sold for land value and profited more than $300,000 in just seven months.
Mr Malan and colleague Travis Miller recently marketed a derelict property at 24 Yacht Street, Southport which was dubbed, “the quintessential worst house in the best street”.
The owners had planned to re-build but instead opted to cash out quickly while buyer demand remained high and sold for $346,000 more than they had paid just seven months earlier.
“The market is moving so quickly that just by presenting the property correctly vendors are making a big margin,” Mr Malan said.
“I’ve had clients who have made $300,000 to $400,000 just by doing the lawns, staging the home and with the right marketing campaign and so we are seeing less and less flips because you can make profit either way with no risks.
“Timing is more important because supply is so limited right now,” he said.
Four-bedroom waterfront home at 19 Notre Dame Ct, Varsity Lakes has been fully renovated for sale.
Master Builders QLD Gold Coast regional manager Adam Profke said building material costs had reached record highs this year, with price hikes across the board of at least 10 per cent and in some cases up to 40 or 50 per cent.
Reinforcing steel, for example, now costs $2,100 per tonne — up from $1,200-$1,400 per tonne in January, he said.
“If a client wanted a renovation done urgently or quickly which is the name of the game in flipping then that is going to be problematic,” Mr Profke said.
“There is a real risk you may not get the return you are expecting because if you are starting a property today it is highly likely you will experience material delays, and you might not be able to get timber and frames and roofing material until February next year.”
The Varsity Lakes home is marketed by Conal Martin, of Kingfisher Realty, with a $1.849m price tag. It last sold in May for $1m.
Builders had also been hurt, with some forced to personally cover the cost of finishing a job that had been delayed if a fixed price contract was signed early in the year.
Demand was expected to pique again when QLD borders opened to southern investors who had put projects on hold during lockdown.
The report found a significant uptick in renovation on the southern Gold Coast, with 20 per cent of valuations between Currumbin and Mermaid Waters undertaken for properties where projects were planned, underway or had been recently completed. The majority of these were for homes priced between $600,000 and $1.2m.
“This sector of the market seems to be young couples, families or builders taking advantage of low interest rates and trying their luck with a product that will obtain a premium on sale from the owner-occupier market,” Ms Rockliff said.
This fully renovated Hamptons-style home at 5 Twenty Sixth Ave, Palm Beach sold for $1.825m via Josh Willatt, of McGrath.
>>>>TOP TIPS FOR RENOVATING FOR PROFIT:
1. Keep it simple
2. Do not renovate to your own specific taste
3. Target the family market or high-end renovations for a higher paying purchase
* source: Herron Todd White
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