Property Flipping in Australia: The Cosmetic Renovations for Profit Worksheet

In this table, it's listed in five components from the Australian ranges of values to a typical house (all a sample house). Sources cover Australian Property Experts, Collings, Proper Easy, Your Property Guide, Mozo, Finder, and API Magazine. Notice the sources all have a commercial product or service to sell, and none publish reproducible data; these will be noted where needed. Dollar sums and ranges on this sample house are illustrative, and the information is general advice, not financial or tax advice.

How the Property Flipping Worksheet Works

The worksheet has five sections that appear in order:

1. Part A figures the scope costs
2. Part B determines the hurdle for each line
3. Part C puts the hurdle up against the published return claims
4. Part D puts the claim up against the specific street
5. Part E stamps each line with the conclusion

This example is of an old three-bedroom house costing $650,000 with a six-month hold. Selling costs are 4% of the sale price, and holding costs are $1,500 per month. Both assumptions are personal. As stamp duty varies by state, it is not included in the worksheet.

Part A: Property Flipping Scope and Cost

These costs are based on ranges available in the literature. A single value was taken between the upper and lower bounds of each range.

Australian Property Experts act as a buyer's agency, so the ranges listed are planning assumptions. Your Property Guide said older properties have a higher contingency.

Part B: The Hurdle in Property Flipping

Each line is tested here. For example, if the $14,000 kitchen upgrade only adds $14,000 to the sale price, 4% is lost to selling costs. Every line needs to add its cost / 0.96 to the price to break even.

A line returning 100% on its cost will lose $1 for every $25. Break-even is therefore a rather complicated 104.2% of the cost.

Part C: Where Published Claims Land in Property Flipping

The following claims are then applied to the hurdle. Return data is taken from Collings (paint and flooring 80% to 120%, kitchen 70% to 100%, bathroom 60% to 80%, kerb appeal 50% to 100%) and API Magazine, Proper Easy and Mozo, which range from 57% to 85% for kitchen and bathroom. The widest range for each line is used, with the 57% low end rounded up to 60%.

Even in the most liberal of the published ranges, the scope does not go beyond its hurdle.

Not all agree. Australian Property Experts asserts that cosmetic work to the tune of $30,000 to $50,000 can bump the property value up by $60,000 to $100,000, i.e. a 200%+ return. Finder echoes the claim, saying that the cosmetic work is $20,000, but claiming its figures on the basis of "Australian real estate data" (no more detail). The table at the bottom of this article, from an August 2022 API Magazine issue, does not describe its methodology. If claims are off by a factor of three, none is correct.

Part D: The Street Gap Test for Property Flipping

Why do cosmetic flips still make money if line-by-line returns produce a loss? Because the buyer sees added value in a finished house versus a dated house. Plus, they have to mentally add in the pain of renovating. Proper Easy says that a renovation might fetch a higher price than its raw numbers imply, for that reason. That is the difference: the difference in the sale price between the needs- and wants-listed house on the street.

It is suggested to source uplift by comparing sold recently renovated and unrenovated dwellings nearby. Use realestate.com.au or domain.com.au to gather sold prices. RP Data is often three or more months behind and the change is not yet reflected in the reports.

Here are four street gap situations for the sample house. Scope: $45,425. Cost to hold: $9,000.

The break-even gap is $83,776, or 12.9% of the purchase price. To make $40,000 profit, the gap must be $125,443, or 19.3%.

What is the gap on your street? If you can't figure it out from three paired sales, you are not making a profit yet!

Part E: Stamp Each Line Before You Offer

Give every line one of four stamps.

Finder has another category that is literally invisible. Asbestos removal, rewiring and other repairs or updates will get rid of buyers' concerns, but they will add little value visible to the end customer. They should be put into the budget without expectation of ROI.

Tax and Exit Notes

Collings clarifies that profits on flipping are treated as ordinary income and are not eligible for the 50% discount on capital gains. Australian Property Experts claims that flipping, when including capital gains tax and stamp duty, is generally worse than buying and then renovating and re-financing, even at a loss. This is a buying agent that promotes the hold model, and Collings is a buying agent. Both are marketing and doing their stuff, so perform each calculation yourself, and see your accountant.

How FlipSync IQ Supports Property Flipping and Cosmetic Renovations for Profit

The worksheet is a deal model that FlipSync IQ runs live. The deal analyzer runs an ARV simulation with stepped max purchase prices and you immediately see your ceiling re-calculated. Margin protection is still in play where a smaller street gap reduces your offer before you sign.

In construction, tracking for budget vs. actual shows red and green variances for each line during building. Receipts, invoices, and staged payments are booked to budget and pre-loaded tasks generate a trade sequence. Holding costs are booked to the calendar. The ROI dashboard puts projected and actual returns side by side. For presentation to a financial partner, the Investor Package Report includes comparable sales, tailored CMA data, placeholders for before-and-after photos, and projected equity splits and ROIs.

Now, the method of keeping measurability in cosmetic renovations for profit: a hurdle per line, a gap per street and an actual per receipt.

Property Flipping: Cosmetic Renovations for Profit Start With the Gap

Property flipping favours the purchaser who assesses the gap before choosing the finishes. Cosmetic renovations meant for profit achieve success when the purchase price reflects an outdated home and the street exhibits a large gap to renovated sales. They fail when a property is bought at a renovated sale price expecting to be camouflaged by paint.

The key is using the worksheet on each property you are considering. Include the scope, set the hurdle, check the numbers, value the street, and stamp each line. Cosmetic renovations for profit require documentation: invoices, dated photos, and actuals versus plan. Sign up for a free FlipSync IQ trial and put the worksheet to work on your next house flip, because cosmetic renovations for profit start with the gap.