Should I flip house or hold it for a longer term?

Any general questions you might have in regards to loans and finance.
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Otto Dargan
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Re: Should I flip house or hold it for a longer term?

Post by Otto Dargan »

Hi Baidhya,

The choice of the decision will ultimately depend on your investment strategy - whether to hold on the property for a longer term or a shorter term. Both strategies have its own merits and drawbacks.

Holding the property for a brief period or flipping houses is when you buy a property with the intention of selling it for a quick profit rather than holding onto it for long-term capital gains.

It involves carefully choosing real estate markets that have the potential to grow quickly so you really need to do your research on any influencers on this growth. This can include a planned highway or motorway, a new train line, a new school and shopping centre, or anything else that will gentrify or improve the local community.

Whereas, buying a property as an investment and holding the property for longer-term involves waiting for the property value to appreciate and selling it for a profit.

So, we can’t exactly say for sure which strategy will be beneficial for you as we are specialists in mortgage broking only. However, you may want to consider getting in touch with a good real estate agent or a buyer’s agent, such as Cohen Handler, who can help you choose a growth market.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Should I flip house or hold it for a longer term?

Post by Otto Dargan »

Yeah sure, Baidhya.

Apart from the chances of earning a handsome profit, you could reap following benefits to you:
  • Build your professional network: It helps you to build a list of useful professional contacts such as real estate agents, solicitors and conveyancers, insurance brokers, and other investors who can become helpful for future investment.
  • Be a better renovator: It makes a lot easier for you to obtain enriching construction and renovation experience.
  • Make you a better property investor: You’ll also gain insights about what to look for in the local real estate market and master the art of negotiating with a vendor (person selling the property).
Besides the good points, flipping can involve these following drawbacks:
  • Losing money:Many factors may contribute to financial loss instead of making a profit including taxes related to buying and selling property including capital gains tax (CGT) and stamp duty.
  • Holding costs:The property may not be sold as quickly as you first anticipated thus increasing the costs related to maintenance and your overall investment loan repayments. This is an opportunity cost and considered “dead money” as a property investor.
  • Stress:The entire process of finding an undervalued property, calculating the costs of buying and renovating, and finding potential buyers involves time and stress.
  • Missed opportunity cost:There’s always a chance of missing out on a higher return on investment (ROI) if you sell the property at the wrong time.
We’re specialists on investment home loans. Please call us on 1300 889 743 or fill in this free enquiry form to speak with one of our mortgage brokers about your investment plans.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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