What is property flipping, and how does the finance work?

Property flipping is the process of buying a property, renovating and then selling it for a profit within a relatively short timeframe.

Often this will be an older home, maybe purchased as a deceased estate and likely in its original condition. Think 1960’s, 1970’s and brown wallpapered walls and threadbare carpet. There are great bones to the home, it’s solid, and all it needs is to be brought into current times where the value is added. 

Buying well, renovating and then selling can be a great opportunity, but financing a property flip is very different from financing a family home.

The reason comes down to how banks assess lending.

Most banks prefer long-term lending where a borrower intends to live in the property or hold it as an investment (A 30-year home loan is what they want). A property flip is a short-term project, with the intention of selling the property once the work is complete. It’s basically a business move, where the outcome depends on accurately forecasting renovation costs and the property's eventual sale price.

Because of this, most borrowers find that the main banks won’t lend specifically for this scenario. Their preference is typically to provide long-term lending for owner-occupied homes or investment properties that generate rental income.

This is where specialist short-term finance comes in.

How does property flip finance work?

Specialist, or non bank lenders provide finance for borrowers who need funding for a shorter period, typically while they renovate, add value, and prepare the property for sale.

Unlike a standard home loan, these lenders will often focus on:

• The property's value and what has sold recently in the surrounding area. 

• The scope of the renovation project

• Your experience 

• The proposed exit strategy 

The exit strategy is particularly important. You'll be planning to sell, or even do-up the home and then refinance to a main bank as a long term hold/investment with rental income. 

It’s all about having a clear plan, given that this is type of lending is designed to be short term.  Lenders want to understand how the loan will be repaid at the end of the project, whether that's through the sale of the property, a refinance to another lender, or other proceeds to come through. 

What are the benefits of specialist short-term lending?

The biggest advantages are speed and cash flow. 

Specialist lenders are often willing to assess opportunities that don't fit traditional bank policies, allowing investors to move quickly when the right property becomes available.

Depending on the project, funding structures may include:

• Interest-only repayments

• Capitalised interest

• Additional funds for renovating. 

• Flexible loan terms aligned to the project timeline (generally up to 12 months approval)

Every lender is different, and the right structure will depend on the property, the project, and your overall financial position.

Is property flipping right for you?

It’s rewarding, but it can also sound easier than it actually is. Plus it comes with risks. There's a saying “it will cost twice as much and take twice as long as you think".

Renovation costs can increase, project timelines can blow out (the Council consent process can sometimes add weeks), and market conditions can change. It's important to understand your numbers before committing to a project and to have a realistic plan for both the renovation and the exit. Having a plan B is vital. One of the best backup plans is knowing the property could be kept as a long-term rental if the market doesn't cooperate.

Having the right finance approval and structure in place from the start can make a significant difference to the success of a project (and your stress levels!). 

Thinking about your next flip?

At Colab, we’ve personally experienced this in our own property journeys. We’ve built, we’ve renovated and we’ve sold for profit. We know what it takes, and we work with a range of specialist non-bank lenders who understand short-term renovation and property flip projects.

If you've found an opportunity and want to understand what funding options may be available, get in touch for a no-obligation chat.