Hi everyone,
I have recently begun my foray into real estate by marketing for lease/option deals. Being young I have little to no money and there is no possibility of me obtaining finance so I am pursuing more creative strategies. What I have found when speaking to sellers is that while they may be motivated, most (understandably) require at least a portion their cash upfront.
Basically I wanted to try and capitalise on these leads by negotiating a discount and then flipping them to another buyer. It seems like flipping/wholesaling is popular in the US but there is little discussion of it here in Aus. Is flipping not as popular here because of differing attitudes towards real estate and sellers' reluctance to accept a discounted price for their property? High prices and a lack of cash buyers? Or are flips more common here than I assumed?
I was also considering flipping properties to retail buyers with deposit finance in the event that I can't find a cash buyer or negotiate a steep discount. I am aware of the difficulties of obtaining financing on a flipped property but from what I have discussed with other investors this strategy is possible.
Any thoughts/advice would be appreciated
Dan
Hi Dan
No flipping is a regular used strategy by developers especially if they have a few deals on their plate.
Course still can be a dangerous method of buying especially if you can't actually settle.
Remember if you are flipping you are still going to incur Stamp Duty etc so we would probably look at a Put & Call option strategy as S/D is exempt in many States.
Of course either way you are still going to incur some costs including deposit, legals etc.
Either methods still relies on the Vendor accepting the terms of your contract / option.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Dan
As well as the processes Richard mentions above, if we wish to flip a property, we control it with a Call Option that contains what we call a 'Higher Price Clause'. This Higher Price Clause, in short, allows us to flip the Option at a price of our choosing, without the new buyer knowing what we got the property for. Good luck.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hi Dan,
It is a good strategy and at certain point I remember how it is to be in your shoes.
You have to accept that there will be deals that falls trough and there will be deals that will help you to break trough.
I agree with Paul's advice – control every single flip with Option – we call it as 'Lock Out' agreement, it will make your life a lot more easier if you are doing flips.
And well done on choosing flips as a strategy to build up your deposit and get on property leather.
All the best!
PrimePropertyInvestor wrote:property leather?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thank you for the replies everyone. Are you all flipping to cash buyers or jumping through hoops and flipping to an investor with finance? From what I understand most lenders will not finance a transaction which includes an assignment fee/spread created via a flip.
Can this problem be avoided through the use of an option and then charging the end purchaser a separate assignment fee (which is not included in the sale price on the contract of sale)?
I have also read that it is possible to register a caveat on the property once I have signed my option with the seller. Once I have found an investor to purchase the property I assign the option at a higher price, and then charge the seller the spread I have created in return for removing the caveat so that the transaction can go ahead. This seems like a better strategy given that the end buyer will be unaware of the price I obtained the property for.
Are these two strategies feasible for allowing me to flip a property to an end buyer who requires finance to purchase the property? It might just be my inexperience but it seems unlikely (to me) that there are large numbers of investors who are actively purchasing properties for cash that I can flip deals to.
Thanks,
Dan
I have a few questions about flipping as I’m considering changing my current style of investing which is buy and hold positive cashflow property but its not making me as wealthy as i’d like to be so my few questions are and sorry if they are outdated i read into flipping many years ago and im sure some laws etc have changed:
1. If you sell within a year of purchasing the property you are taxed 50% of the profit?
2. Can you apply for loans with no early repayment fees as you plan to flip?Thanks Tony
Tony Fleming | Triumphant Property Group
http://www.triumphantpropertygroup.com.au
Email MeNSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury
You are not taxed at 50%. The profit gets added to your income and that is the rate you are taxed at.
If you HOLD for MORE than 12 months you are taxed on 50% of the profit. (not taxed 50%)
Hi Tony
Read above a bit more regarding flipping using options and other legal paperwork. These methods should not involve GCT. Of course, don't believe me as I'm not qualified to make such a statement, i.e. check with your accountant or other relevant professional.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
buying with the intention of selling for a profit would not fall under cgt provisions but just ordinary income tax.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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