Is house flipping still viable in the current market?
Category RealADVICE
"House flipping was once very common, and it was a great way to generate wealth if you knew what you were doing. However, house flippers have become significantly more wary since the interest rate increased to its current historic high, so it begs the question as to whether this is still a viable option in the current market," says Gerhard Kotzé, CEO of the RealNet property group.
"For the most part, real estate is more of a long-term investment strategy, as it can take a long time before a home appreciates enough for someone to flip a house and turn a profit after expenses like transfer duties, bond initiation fees, and agent commission fees are covered."
"So, if you want to turn a profit quickly, you need to find the right kind of property, and you can go about this one of two ways. You can find an older home in a desirable area for a lower than average price, and renovate it."
"It's best to focus on renovations that offer high returns on investment, like the kitchen, bathrooms, floors, and security features. However, you need to be careful not to overcapitalise. To avoid this, you need to find out the average selling price of homes in your area. Each suburb usually has an average selling price, with most homes in a specific area selling within a certain price range."
"Doing something like converting a starter home into a luxury four-bedroom home in an area that's popular with first-time buyers wouldn't make sense. In this case, renovating a smaller home to create extra space in an area popular with growing families would be a better idea."
"The other simpler and less time-intensive option is to purchase a property in an area experiencing above-average house price appreciation. According to Lightstone Property, at the end of May 2024, national year-on-year house price inflation currently stands at 3.22%. This varies per province and is highest in the Western Cape at 4.3% and lowest in Gauteng at 0.23%."
"Local market conditions also play a big role in house flipping. In desirable neighbourhoods where homes are scarce, property sells quickly, which means that your flip house will likely move much faster and will reduce your risk and holding costs."
"To answer the question, house flipping is still a viable option in the current market, although the margins are a lot slimmer. If you're interested in pursuing this path, then it would be best to chat to a local Property Practitioner to get more of an idea about the local market
Author: RealNet
