flipping?

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brettcoupe

• 20th Jun, 2006

• #1

Hi Guys

I am looking into an IP for short term gain
Properties are already established, I hear a lot about people flipping but I am having difficulty understanding how it can payoff, when

1) Property stamp duty buying costs etc
2) selling commisions etc

Am I missing something or are the capital gains so high that it covers all these costs?

Cheers
Brett

 

geoffw

• 20th Jun, 2006

• #2

Brett

It was a strategy which works where:
1. The property market is rising rapidly
2. You have buyers who really want to get into the market, but who can't
3. Laws allow a transfer of title between exchange and settlement without penalty.

In Perth, you have the first two conditions. I don't know about the third. In some Eastern states, there used to be the condition that allowed an exchange to be between xxx "or nominee", and the nominee to be changed before settlement. I don't know if that is the case in WA now.

 

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brettcoupe

• 21st Jun, 2006

• #3

Thanks

I knew there had to be a trick to it

Cheers
Brett

 

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alexlee

• 21st Jun, 2006

• #4

Flipping is more common in the US because it seems that stamp duty is very low.

In Australia, from my understanding, you can do it only if you can assign the contract. To make money from that, you either get it at below market price or the market moves up after you sign the contract. Flipping OTP is the same sort of thing.
Alex

 

Qlds007

• 21st Jun, 2006

• #5

In the US Stamp Duty is non existant.

The easiest way is to use a Put & Call Option and avoid S/D (In most States).

 

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Ausprop

• 27th Jun, 2006

• #6

Brett as you are posting from Perth I will save you the time and expense in investigation... forget the put/call option in WA as it is even more harsh than a normal contract as the full stamp duty is due and payable immediately.

 

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brettcoupe

• 27th Jun, 2006

• #7

Thanks all

Not only explained the Flip but also the Put and Call

Our company sold a building under put and call, Never really understood the concept

Cheers
Brett

 

G

grubar30

• 29th Jun, 2006

• #8

geoffw said:

Brett

It was a strategy which works where:
1. The property market is rising rapidly
2. You have buyers who really want to get into the market, but who can't
3. Laws allow a transfer of title between exchange and settlement without penalty.

In Perth, you have the first two conditions. I don't know about the third. In some Eastern states, there used to be the condition that allowed an exchange to be between xxx "or nominee", and the nominee to be changed before settlement. I don't know if that is the case in WA now.

Click to expand...

A nice explanation Geoff...

The problem I have with some people's view of flipping is that a renovation must take place, right after the purchase and prior to the quick sale.....it's these same people who say flipping only works in boom times, hence inferring that "trick and flicks" don't work in flat markets....hang on a minute - YES THEY DO....a reno is a reno, and done properly (ie, within budget while still maintaining quality) will reap results, irrespective of what part of the property cycle you're in....the misconception I feel lies in the fact that profits from renovation, when selling in boom times, get mixed up in the big windfall that is primaly natural CG....


George "flipping 101" Grubar

 

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TheAnalyst

• 24th Jul, 2006

• #9

I think you can avoid the difficulties by using nomalee. However, you got to get the buyer to agree to pay you the cash for the profit part, then take the contract himself as he was the origional buyer.

 

Qlds007

• 27th Jul, 2006

• #10

Analysy - the use of the words "and or nominee" does not avoid double stamp duty.

You need to use an Option Contract and then insert the nominated party after the Option is exercuted.

 

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beech

• 27th Jul, 2006

• #11

hi Richard,

im pretty sure in Melbourne now theres no way to get around the S/D with a put and call option.

Is that right for Victoria?

 

Qlds007

• 28th Jul, 2006

• #12

Beech

I was under the impression that it was only WA that Stamp Duty on Option Contracts but it could be Victoria. Check with the local Office of State Revenue.

 

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beech

• 29th Jul, 2006

• #13

Qlds007 said:

Beech

I was under the impression that it was only WA that Stamp Duty on Option Contracts but it could be Victoria. Check with the local Office of State Revenue.

Click to expand...

I shall do that,thanks.

 

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stockt12

• 31st Jul, 2006

• #14

hmmm... i'm from WA too and this thread saved me a LOT of research as I wanted to flip a property or two while we head upwards into 2008

Is flipping possible in Queensland?

 

Qlds007

• 26th Sep, 2006

• #15

Hi Stock

Yes flipping is very much possible and alive in Qld.

There is no SD on a Put / Call contract and that means the nominated entity covers the duty and you as the flipper make all the profit.

Oh to live in the Sunny State.

 

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shaunwalker1

• 29th Sep, 2006

• #16

i was doing it in NZ last year.
got early access (most times) a coat of paint and some new curtains and i was done. we would then onsell to a customer database we had going. and then hold their hands through the buying process.
the best part was no stamp duty, land tax or capital gains tax.
i did get caught out with GST. and then the australian tax office wanted a chunk of money after i'd paid all the tax in NZ
thankfully i had a smart accountant who got me out of it and all profits stayed in NZ.
cheers all
shaun