Property traders flocked to a South Auckland auction room last week to bid on two houses that desperately needed a makeover.
Together, the three-bedroom homes in Manurewa attracted 99 bids from eager buyers.
The sales came as industry experts disclosed to OneRoof that there was still some money to be made from flipping, but only if it was done right.
At Ray White Manukau’s auction last week, a 1920s weatherboard home on Jellicoe Road sold for $582,000 – 11% under its CV.
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Ray White Manukau co-owner Tom Rawson estimated that the cost of bringing it up to scratch would be about $80,000.
“The owners were moving out because they didn’t have the energy to do the work and had been delaying and delaying. They thought, ‘Bugger it, we will just sell it and let someone else do the work’.”
The listing agent, Uros Bojovic, urged buyers to view it before bidding and Rawson said most of those in the auction room could see its potential and look past the rotten weatherboards and sticky windows.
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“It’s a cosmetic renovation,” Rawson said.
“That will be renovated and bought up to standard. The next time around, a family will buy it. It’s a cool location, and cool-looking house that just needs love.”
Also attracting trader attention at the auction was a tired-looking house in neighbouring Ferguson Street. It sold for $797,000 – 5% below CV – after a tussle between nine registered bidders.
Listing agent Rubal Singh told OneRoof: “It’s still tidy, but there are still bits and pieces that are needed to be doing in the house.”
He said the amount of interest in the house from property traders showed there was still money in flipping.
However, Rawson warned that not every house was a money-spinner, noting that some traders were losing $5000 to $10,000 on projects.
Property traders were also keen to snap up a property on Ferguson Street, in Manurewa, which sold under the hammer for $797,000. Photo / Supplied
The new owner plans to renovate the three-bedroom house before selling it. Photo / Supplied
“You still have to buy well, you still have to know what you are doing. Just buying a house that needs a lot of work doesn’t guarantee that you will make money. You need to know what you are doing,” he told OneRoof.
“Some [traders] are taking hits, but some aren’t. Others are doing really well. It all comes down to cost control and time – the quicker you can buy, settle, renovate, and resell, the better because you are in the same market. All good if you are in an inclining market where the longer you hold on to it the more you make, but we are in a sideways market. The biggest cost is the amount of work you do, but also the holding costs.”
The properties that yielded the best results were the ones that were a “bit more derelict” because they didn’t have home buyers and investors competing for them and pushing the price up.
“The worse they are, the better because the competition isn’t there – rightfully so because no one can move into them,” he said.
“Some homes just don’t suit first-home buyers or investors but when they are fully renovated they do. So there is that price that people will pay to having it ready to go vs not ready to go.”
Property investment coach Nathan Broughton said there was money in flips if they were done right. “Definitely profitable, but they are a lot harder to do than most people think,” he told OneRoof.
A lot of properties didn’t work because they were either too bad they needed to be bowled or were nice enough for a first-home buyer to move into.
The key was to find the right property. These tended to be the ones where you were essentially fixing someone else’s problem. Also, houses with layouts that could be easily tweaked to add another bedroom were good value.
“A lot of people think you can put some new carpet and paint through and call that done, but you are not going to make nearly enough to make a flip work with a small renovation.”
He also warned newbie flippers to look beyond the resale price and to factor in the cost of the renovation, servicing the mortgage, agent fees, and tax.
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