Flipping houses, also known as property trading, has become increasingly popular in New Zealand. It may seem glamorous and lucrative, but it’s important to navigate the potential pitfalls. Whether you’re a beginner or looking to improve your flipping game, these insights will set you on the right path.
Set Up the Right Structures: Before embarking on your first property trade, establish the appropriate legal and financial structures. This ensures compliance with tax regulations and maximizes tax efficiency. Consult with an accountant to determine the best structure for your circumstances, including understanding GST zero rating and tainting.
Build an A Team: Surround yourself with a reliable and cohesive team of experts who specialize in property trading. This includes professionals such as an accountant, mortgage broker, solicitor, real estate agent, builder, painter, plumber, electrician, and property stager. Seamless communication between team members streamlines the process.
Avoid Greed: Don’t hold out for the highest offer when selling a property. The initial offer is often the best offer, and waiting for top dollar can lead to significant holding costs and delays for your next trade. Be realistic about pricing and always leave room for the next buyer to make a profit.
Know Your Numbers: The most critical aspect of property trading is purchasing the right property at the right price. Spend ample time researching and understanding your market. Study comparable sales, both renovated and in need of renovation, to gauge end value accurately. Learn to identify hidden potential that others may overlook, such as reconfiguring layouts or adding extra features.
Be Prepared to Walk Away: Negotiations can reach a stalemate, and it’s crucial to maintain your financial boundaries. Don’t be tempted to exceed your budget. Knowing when to walk away from a deal is essential for long-term success.
Be Realistic About Timeframes: Set realistic expectations for the timeline of each trade. From purchasing the property to receiving funds at settlement, allow for factors like renovation, staging, marketing, selling, and contract processing. Consider the availability of tradies during different times of the year and potential market slowdowns.
Assess Financial Stability: Before diving into property trading full-time, evaluate your financial situation. Tightened lending criteria mean banks often require at least two full financial years of trading income before providing mortgages. Having a salaried income, either from yourself or a partner, can strengthen your position with lenders.
Take Action: Create a plan and take immediate action. Attend open homes, network with agents, and seek guidance from experienced property traders. Remember, dreams become realities only when accompanied by action.
Property trading can be an exhilarating rollercoaster ride. By following these tips, you can enhance your property trading skills and increase your chances of success.
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