Weigh the numbers when flipping

WHEN it comes to renovating for profit, or “flipping” property, the best way to ensure success is to neatly fold away your emotions and lock them somewhere safe for the duration of your project.

“Concentrate 100 per cent on the numbers and zero on emotions,” says the founder and chief executive of property-investment consultancy Empire, Chris Gray, who has 20 years' experience in renovating.

He says for every dollar spent you should get an additional dollar of capital growth; for each $100,000, you should get an extra $100 a week in rent.

It's also crucial to consider your experience and finances before you rush out and buy a “renovator's delight”. If you've never renovated before, start small with a unit needing a cosmetic update. This might involve fresh paint, new floor and window coverings, and new appliances in the kitchen. The next step could be a project requiring a new kitchen and bathroom.

Gray says he has seen people with no renovating experience tackle large structural renovations and blow their budget by 50 per cent.

“It's like share trading,” Gray says. “Everyone wants to jump in and make a quick profit, but you should really be paper trading first.”

Another common mistake is investors falling in love with a property and deciding they want the best appliances and finishes.

“They haven't renovated for the target market but as if it were their own place,” Gray says. The cheapest tradies can also mean heartache. “You take the biggest risk, and quite often the cheapest becomes the most expensive.”

Buying the worst house in the best street is a great strategy, provided you buy well below the street's median price. “If you really want to guarantee your renovation is going to work, double the time frame and the budget and see if you will still make a profit,” Gray says.

— Domain.com.au