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Once you strip away all the details, there are really only two investments strategies for property investors to choose from.

They are:

  • “Buy and Hold” – where you buy a property and earn money by holding the property over the long term and earn rental income.
  • “Buy and Flip” – where you purchase a property, renovate and make money by selling it quickly in the same market.

This article is going to discuss the pros and cons for the “buy and flip” strategy.

Full disclosure, this isn’t the strategy most commonly used by the investors we work with here at Opes, but that doesn’t mean it doesn’t have its benefits.

So, in this article, we’ll take you through the details of flipping, and the different ways you can secure money to fund them. That way you can decide which suits your investment goals over the long term.

If you have any questions or thoughts, please leave them in the comments section below.

Flipping property strategy before vs after

Do you have a question or comment about flipping? Feel free to leave your thoughts in the comment section at the end of the page.

What is flipping?

Flipping houses is when you purchase a property, renovate, then sell it for a higher price.

The benefits of this strategy are:

  • You are likely to make a decent-sized profit, since you are actively improving the value of the property.
  • There’s a lot of personal satisfaction involved in improving the value of the property.
  • You don’t have to deal with tenants, since you aren’t renting the property.

And most importantly, you get the money straight away. Think about it: if you buy a house, renovate or it increases in value, it doesn’t change your bank balance. The money is still in the house.

But when you flip properties, as you sell the property you have access to the cash.

Sounds great, right? But there are some drawbacks:

  • You don’t earn capital gains over time, because you’re not holding on to the properties.
  • You pay tax on any money you make, whereas long-term buy and hold investors typically don’t pay tax on their capital gains.
  • It’s time-intensive and you’ve got to do most of the work yourself to keep costs down.
  • You need the money to be able to do it – both a 40% deposit for a property and the money to renovate.

Now, some in the investment biz might go so far as to say, “Flipping is a bit outdated.”

In 2016, 6.6% of Auckland property was “short hold sales,” according to CoreLogic. That means just over 6% of properties sold had only been owned for 12 months or less.

But 5 years later, in 2021, that figure fell to 1.7%. That suggests flipping is less popular than it was in the past. However, there is still a dedicated and successful crew of flippers who use the strategy. And you could be one of them.

Will the banks lend me money for flipping properties?

To flip properties you need a mortgage to buy the property in the first place. There is often confusion in property investment circles about whether banks will lend to flippers or not.

The complicated answer to this question is: the main banks often don’t lend for flipping. But it really does depend on individual circumstances.

For instance, banks make their money from you – the borrower – by charging you interest over 30-odd years.

So, if you buy and sell a property within a few months and pay back the mortgage quickly, the bank doesn’t make a lot of money.

It just isn’t really worth it for them if you’re not going to be a long-term client. So, there might be instances where a bank will say “No”.


It is much more likely that a flipper will get the lending to buy a property from a non-bank lender. These are businesses that lend money for residential property, but don’t offer the same services as banks, like credit cards and term deposits.

BaseCorp, for example, is a lender popular with people who flip properties, because they are willing to lend for this purpose.

It is important to note you are going to pay a higher interest rate than you would with a bank. Typically you might pay a 7% interest rate at BaseCorp and an additional 1% set-up fee.

For example, if you take out a $600k mortgage, you’ll pay a $6k set-up fee, and then 7% interest on the money borrowed.

That compares to a main bank who might only charge 4.5%.

What are some ways to save money?

Because flippers pay higher interest costs, they are often looking for ways to keep their mortgage costs low. One way is by using “deferred settlement” and “early access.”

This is where the investor has the ability to do renovations on a property before they’ve borrowed the money from the lender and paid for the property.

This means that the flipper is able to renovate the property without having to pay the mortgage.

It’s a play that can be also used by buy and hold investors, who want to renovate the property before renting it out. The longer settlement allows interest-free time to get the property in tip-top shape without having an extended vacancy.

How much tax do I have to pay if I flip properties?

If you decide to make a habit out of buying and selling houses for profit, you are going to meet the bright-line test.

This is New Zealand’s lite version of the Capital Gains Tax.

It means that if you sell a residential property you have owned for less than 10 years you may have to pay income tax.

That could mean paying 33% of any gains you’ve made. On top of that, you might also be liable for GST, which is another 15%.

So, almost half of your profit margin is going to Inland Revenue.

For the flipper celebrating a 10% increase in profit he or she has just generated in 6 weeks, this additional tax and cost can be quite a blow. See the case study in a moment for a real life example.

Flipping case study

Here’s a real life example. This investor purchased a property in 2019 for $342k. They sold it 7 weeks later for $439k. That’s a massive $97k jump.

But, before you get too excited, that’s not what the investor walks away with.

First, they have to pay the real estate agent. A standard agent’s commission and marketing package for this property is around $19k.

On top of that they need to pay for the renovations and mortgage interest costs. In this case around $22k.

So before tax, the investor made $56k ($97k uplift in value – $41k of costs). Not bad at all, but that’s not what you walk away with.

Then you still need to pay GST, which is about $7.3k. That takes the total down to $48.7k.

On top of that you then need to pay income tax. If the investor pays a 33% tax rate, they will transfer just over $16k to the IRD.

So, while the property increased in value by $97k, the investor walks away with an additional $32.6k (33% of the increase in value).

Don’t get us wrong. This is a good flip, and it only took 7 weeks. But, flipping is not as simple as “buy a house for $500k, sell it for $600k and walk away with $100k.”

The question you need to ask yourself is whether you could deal with the stress of the renovation. The answer for some ardent flippers is “hell, yes”. For others “hell, no.”

Is flipping right for me?

But, all that said, renovating run-down properties and renovating them into a dream home is a romantic dream for many.

It’s like you’re living out your own episode of Extreme Makeover - but the house version … and you come out the other side with tens of thousands of dollars profit.

But as the saying goes: If it was easy everyone would be doing it. And flipping is a full-time job.

These days flipping is no longer the passive investment it might have once been, it’s very much a full-time job. You really have to knuckle down and get involved.

So, if you are quitting your 9-5 because you want to have more time with your family, flipping isn’t going to be the answer for you.

To be successful with flipping you need cash and you need time.

Write your questions or thoughts in the comments section below.

Opes Partners
Laine 3 001

Laine Moger

Journalist and Property Educator with six years of experience, holds a Bachelor of Communication (Honours) from Massey University.

Laine Moger, a seasoned Journalist and Property Educator with six years of experience, holds a Bachelor of Communications (Honours) from Massey University and a Diploma of Journalism from the London School of Journalism. She has been an integral part of the Opes team for two years, crafting content for our website, newsletter, and external columns, as well as contributing to Informed Investor and NZ Property Investor.

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