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Monday, March 07, 2011

This article describes the sixth strategy of nine property investment strategies.


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Strategy 6 – Buy and flip

This can mean different things to different people but what it usually means is to buy ‘off the plan’ and sell before settlement. Some investors use this strategy to buy a few properties and then sell most of them before settlement. They then apply the profits to reduce the debt on the properties they retain. A fantastic strategy for the experienced investor and it works well in an upward-moving market. However, it can be fraught with danger if the market falls during the construction period and you don’t have the spare resources (cash or equity) to cover the shortfall. It can be a bit like the stock market ‘margin calls’ that are rapidly bringing the share market to a grinding halt.

If you intend to buy and flip it is important to get professional advice to ensure that you can cope with a possible decline in value.  If your financial position is such that you could survive such then the buy and flip strategy can bring some fantastic possibilities.

If you proceed down the buy and flip path (after seeking professional advice) – look for developments with the following criteria:

•       Look for brand new developments
•       Developments that have the longest possible timeframe to completion
•       Projects with Progress payment plan that does not require the bulk of the payment till near the end of construction
•       Be first in – often the best gains are to be made early when the developer needs to sell quickly to meet the banks
‘pre-sales’ requirements.  If you wait till the end – you are only choosing from stock no-one else wanted to buy, and /or the price may have already risen substantially as the developer is no longer in need of a quick sale.
•       Of the other hand, sometimes the final lots are discounted as the developer needs to move them quickly so as to move on to his next project.
•       Just get advice from a food quality buyer’s agent who knows about the development.

Download the full report at www.wfscanberra.com.au
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