I've Flipped Houses for Five Years. Here Are the Three Things That Actually Decide If You Profit.

I'm standing in a gutted kitchen in Boronia. The old cabinets are stacked against the back fence, there's plaster dust on every surface, and through the gap where the wall used to be I can see straight into what will become an open-plan living area.

This is what renovation actually looks like. Not the before-and-after Instagram reel. The bit in the middle — the $47,000, eight-week, "what's that stain on the subfloor" bit.

People ask me constantly whether flipping houses is worth it. Whether they should buy something old, do it up, sell it for a fat profit. My answer is always the same: it depends on three things, and the last one matters more than the other two combined.

If you can honestly tick all three boxes, you'll make money. Miss even one, and you're working for free — or worse.

Rule 1: You need the eye before you need the hammer

Walk into a derelict house with me. Carpet's ripped. Kitchen's from 1987. The bathroom tiles are that shade of brown that only existed between 1975 and 1992. There's a faint smell of damp.

What do you see?

If your answer is "a dump," flipping probably isn't for you. If your answer is "new Caesarstone benchtops, SPC flooring throughout, the wall between the kitchen and lounge comes out to create a single living zone, frameless shower screen in the bathroom, and the whole thing gets two coats of Dulux in a warm white" — then you've got what I call the renovation eye.

This isn't about being a designer. It's about being able to look at a wreck and mentally reconstruct it into what a buyer or tenant wants to see. You need to picture the finished product while standing in the demolition zone. Most people can't do this. Their brain gets stuck on the current state and they either lowball the potential or overcommit to unnecessary upgrades.

The renovation eye also means knowing what NOT to touch. Our internal rule is the "three nevers": never move load-bearing walls unless the margin justifies a structural engineer, never relocate wet areas (shifting plumbing adds $15,000-$25,000 for zero visual impact), and never change the external footprint unless you're doing a full extension.

A full cosmetic refresh — paint, flooring, kitchen, bathroom, light fittings — runs between $35,000 and $55,000 for a standard three-bed house in Melbourne's outer east and southeast 1. That same spend can lift the sale price by $80,000-$120,000 when done right. But "done right" means matching the finish to the buyer demographic. You don't put a $13,000 stone-top kitchen into a $650K house in Hampton Park. That's overcapitalisation. You put in an IKEA flat-pack at $2,200 and pocket the difference.

Rule 2: Know your numbers cold (or don't bother)

This is where most amateur flippers blow up.

They see: bought for $700,000, sold for $900,000, profit $200,000. They pop champagne.

Here's what they forgot to subtract:

• Stamp duty on purchase: $38,500
• Legal and conveyancing fees: $1,800
• Building and pest inspection: $500
• Renovation costs: $55,000
• Holding costs during reno (interest on $560K loan at 6.5% for 4 months): $12,133
• Staging for sale: $3,500
• Photography, floor plan, advertising: $3,200
• Selling agent commission (1.8% + GST): $17,820
• Auctioneer fee: $600
• Capital gains tax (assuming 12+ month hold, 37% bracket, 50% discount): roughly $14,000 on the net gain

Total costs: $147,053.

Actual profit on a $200K gross margin: $52,947. That's 26 cents on every dollar of apparent gain. And that's a good outcome. I've seen flips where the renovator "made" $150K gross and cleared $8,000 after costs. Eight thousand dollars for six months of stress, tradies who don't show up, and a council that takes nine weeks to approve a carport.

The numbers don't lie. Before you touch a property, build a full cost model. Every line item. Include a 15% contingency for the renovation budget because there is always something behind the wall you didn't expect — asbestos in the eaves, termite damage in the bearers, a sewer line that's collapsed. Always.

"If you have an emotional resistance to spreadsheets," says Joey Don, CEO of PremiumRea, "flipping will eat you alive. Every project I run starts with a margin model, and the minimum acceptable net margin after all costs is 12%. Below that, the risk-reward ratio doesn't justify the effort."

Rule 3: The profit is made on the buy, not the renovation

This is the one that separates the professionals from the dreamers. And it's the one that most people simply cannot replicate without industry connections.

Why am I standing in this Boronia kitchen confidently telling you this project will net $200,000-$300,000 in profit? Is it because I'm some renovation genius? No. It's because I bought the property $80,000 below comparable sales. Before I spent a single dollar on paint.

The renovation doesn't create the margin. It restores the property to its fair market value. The margin already existed at the point of purchase.

Think about it. Your neighbour's house is the same size, same land, same street. It sold for $850,000 last month in good condition. You can't sell your renovated version for $950,000 just because you put in a nicer kitchen. The market sets the ceiling. The comparable sales set the ceiling.

So the only way to create real profit is to buy significantly below that ceiling. How? Off-market deals. Distressed sellers. Properties that look so terrible in photos that 90% of buyers scroll past. Estate sales where the family just wants it gone. Auction pass-ins where the property didn't reach reserve and the vendor is suddenly negotiable.

Our team sources roughly 30% of purchases through off-market channels 2. We've built relationships with selling agents across the southeast corridor who call us first when they've got an ugly duckling that needs a quick, unconditional sale. That's the kind of deal flow that makes flipping work.

If you're buying on the open market at market price, renovating, and selling at market price — you're working for nothing. The renovation cost plus holding costs plus transaction costs will eat your entire "profit."

I cannot stress this enough. The buy IS the flip.

A real project, real numbers

Let me walk you through one we completed in Hampton Park.

Purchase price: $590,000. This property was a near-condemned house — white ant damage, roof leaks, cracked stumps. It had been on the market for weeks because the photos scared everyone away. We knew the land was 600+ square metres and the comparable street sales were sitting at $670,000-$700,000 for houses in reasonable condition 3.

Our internal renovation team went in. We spent $60,000 total: structural repairs to the stumps, new roofing on the worst section, full interior cosmetic refresh (paint, SPC flooring, flat-pack kitchen, new vanity in the bathroom, all light fittings replaced). Took five weeks.

CBA did a desktop valuation post-renovation: $670,000. The actual market value based on recent comps was north of $700,000. We chose to hold rather than sell — rented it at $850 per week 3.

Total cost basis: $650,000 (purchase + stamp duty + renovation). Rental yield on cost: 6.8%. Annual capital growth in Hampton Park over the past decade: 7.4%. That's a flip we held. The profit compounds every year instead of getting chopped up by selling costs and CGT.

The takeaway: sometimes the best flip is the one you don't sell.

The unlicensed renovation trap

One more thing that keeps me up at night.

Australia's building industry has lost an ugly number of builders to insolvency over the past two years. At the same time, there's been an explosion of YouTube-educated DIY renovators entering the market. Blokes who watched a 12-minute video on how to hang plasterboard and decided they're qualified to renovate an entire house.

I've walked through renovated properties where the waterproofing in the shower was done with regular silicone instead of a membrane system. Where electrical work was done by an unlicensed handyman. Where load-bearing walls were partially removed without engineering certification.

These houses look beautiful. Fresh paint. New floors. Shiny tapware. And underneath, they are ticking time bombs.

When you're buying a recently renovated property, the first question shouldn't be "does it look nice?" It should be "who did the work, and do they hold a registered builder's licence?" In Victoria, any work over $10,000 in value requires a registered builder with domestic building insurance 4. If the seller can't produce a Certificate of Final Inspection or an Occupancy Certificate for any structural work, walk away.

Our projects always use licensed builders. Every job has a building permit where required, progress payments tied to inspection milestones, and full insurance coverage. It costs more than hiring a mate with a ute. It also means the property can be sold or refinanced without anyone questioning the workmanship.

The cheapest renovation is never the best renovation. The best renovation is the one that passes every inspection, holds its value, and doesn't result in a $40,000 remediation bill eighteen months after settlement.

So should you flip houses in Melbourne?

Honestly? Probably not.

Not because it doesn't work — it does, brilliantly, for the right operator. But because most people don't have the deal flow (Rule 3), don't have the cost discipline (Rule 2), and overestimate their renovation vision (Rule 1).

If you've got access to below-market deals, a reliable team of licensed tradies, and the financial literacy to build an accurate cost model before committing a dollar — go for it. The margins are there.

But if you're planning to buy at market, renovate with savings, and sell at market? Save yourself the heartache. Buy a solid investment property in a growth corridor, hold it for seven to ten years, and let the land do the work for you. The compounding growth on $700K of Melbourne land at 7-8% per annum will outperform almost any flip over the same period — with a fraction of the effort and risk.

I'll always choose the boring strategy that makes consistent money over the exciting one that makes good TV.