Property Wealth, the How’s & Why’s – Part 3
There are many factors and methods of investment that come into consideration when discussing Property Wealth. Part 3 of this series takes a look at Flipping Properties.
Part 3 - Flipping
The term “Flipping” received a lot of press a few years back and made somewhat of a resurgence in the last few years. It means purchasing a property, making strategic capital improvements, and then immediately selling for a profit. Whilst much of the focus was on small residential opportunities, it had been extended to commercial and industrial properties as well.
Here’s why I don’t like it…
Property is not designed to be a liquid asset. As we discussed in a previous blog, governments long ago recognised the income potential of property and slugged it with stamp duties and taxes. Also regulations surrounding the transfer of property are a drag on its time based liquidity.
Property transactions are also much larger in capital and require structured funding arrangements in most cases, which also takes time.
Having said that, property is therefore not subject to the hour by hour changes in value that the stock market has, but as a slow burner it takes time to achieve capital growth.
I’m not saying flipping doesn’t work…what I am saying is that it can be a subjective argument about which property, and what capital improvements, will constitute a successful Flip, and when you start making subjective decisions on big capital investments then you start to slide towards greater risk.
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