Flipping houses in Australia: 3 tips for saving money at sale time
Flipping houses in Australia can be a great way to generate wealth, but duties and fees can cut into your profits. DG Institute Founder and CEO Dominique Grubisa discusses three tactics for reducing out-of-pocket expenses at sale time.
How to save money when flipping a house?
Buying a house below market value, adding value, and then later selling the property for a profit is a great way of generating wealth.
But figures from property information company CoreLogic show the number of people flipping houses in Australia has declined over the past 15 years. While more than 20 percent of Australian houses were resold within 24 months of being purchased in the early 2000s, the figure today is about seven percent.
One of the big reasons for the drop-off is the high costs involved in re-selling houses. Government duties, real estate agent fees, marketing costs, conveyancing, and loan discharge fees can all make a serious dent in any capital gains that an investor realises on a house. On the sale of a $1 million house, you could easily be forced to pay out $80,000 at sale time before starting to see a profit.
But it doesn’t have to be that way. While there’s no escaping government duties, it’s possible for smart house flippers to reduce or even eliminate many of the other costs. On many houses the savings could equate to tens of thousands of dollars.
Here are three ways of reducing the costs at sale time when flipping houses in Australia.
1) Sell your property yourself
Real estate agents traditionally take a percentage of the sale price as commission of around two to three per cent. For a $1 million property that will cost you between $20,000-$30,000. And that’s not the only fee you’ll pay a real estate agent. On top of the commission you’ll usually pay marketing and advertising fees of at least $5000.
However, if you’re willing to do a bit of your own legwork, there are now a number of disruptive private selling platforms on which to list your property for sale for a flat fee, starting from as little as a few hundred dollars. With Property Now, for example, you pay about $700 and your house is listed on the major property websites until sold. You also get a printable brochure and sales sign, and you act as your own agent, showing people around the property.
Purple Bricks, on the other hand, provides all the services traditionally offered by an agent, including showings and property ads, but for a far lower fixed fee of about $5000. You can add on to that initial fee if you need to, for services such as copy writing, professional photography, social media campaigns, floor plans and buyer negotiations.
2) Do your own conveyancing
The legal fees incurred after a sale can be reduced if you are willing to do it yourself. When transferring legal ownership from one party to another, both the buyer and the seller will usually engage the services of a conveyancer or solicitor. The total cost of conveyancing through a solicitor can be between $1000-$2000.
You can purchase a DIY conveyancing kit from a number of institutions for less than $100. The kit contains a booklet explaining everything that needs to occur during a property transaction, background about what conveyancing entails, most of the forms you need to undertake the process yourself, as well as free online support for a limited time.
3) Negotiate to avoid mortgage discharge fee
One of the other big costs which many sellers either don’t know about or forget is the mortgage discharge fee imposed by your lending institution, which can range between $250-$500. If you only have a small amount remaining on the mortgage, a hefty exit fee could end up costing you more than the extra interest you will pay by leaving the loan to run its course. Even if you refinance the loan to get a better deal, it may end up costing you more once you factor in the exit fee.
However, you can avoid paying the exit fee if you are willing to negotiate with your lender. If refinancing, ask the new lender to pay the exit fee as an incentive for your business, and if they agree you could save thousands of dollars on top of the refinancing benefits.
So, don’t give up on your plans to flipping houses in Australia. Instead find smarter ways to do things and continue to grow your wealth.
If you’re looking for finance or you’re having a hard time, or you just want to explore other opportunities, join Dominique Grubisa for this upcoming Real Estate Investing webinar and learn how you can find an undervalued property that you can potentially purchase 10% – 40% below market value from motivated vendors.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practicing legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.