I have read about several different techniques to give the effect of peeling paint on a building or other structure. My preferred technique employs hair spray - any will do but I prefer the low odour variety for the sake of my nose.
The first step is to ensure that the surface, whether plastic or wood, is free of dust, dirt and oil. The model I shall use for the pictures below is a styrene plastic kit, the Walthers Cornerstone Walton & Sons Lumber Company kit.
Next, decide what colour you would like to show through from behind the peeling paint. Normally a grey to beige colour would be appropriate if you are weathering a "wood" structure. If you are weathering a "steel" building then the colour would be whatever metal or primer would be plausibly showing through the peeling paint.
When selecting a colour, I suggest doing a test piece. I once decided that a medium grey colour would be appropriate to show through the peeling paint. The top coat of paint was brown. When the top coat was peeled away the grey underneath looked like royal blue against the brown which was rather off-putting.
In the case of the Walton & Sons Lumber Company kit I decided that the colour of the styrene was an appropriate colour to show through the yellow paint finish.
After ensuring that the completed building (without any window glass or roof installed) was free of dirt and grease I applied a coat of hair spray to the walls and let it completely dry. I then used my airbrush to apply the topcoat of paint, an acrylic light yellow. I let this dry overnight. Here is a picture of the completed wall, up close:
Using a medium bristle paintbrush I carefully painted water selectively where I wanted the paint to peel off. After a few seconds of being wet, the topcoat of yellow paint softens considerably and the moisture soaks through to the hair spray which is water-soluble. This makes the paint very easy to flake off. Don't be too aggressive at first until you get the hang of it.
Here are a couple of pictures which show the effect. You might note the white styrene strip with fine wires running lenghtwise. This is for the LEDs which are used to light the building.
Next I applied an even coast of clear matte spray. I really like the Krylon spray for this as it truly is low odour as it claims to be. As with all Krylon spray paint it also dries much faster than others I have tried. I used my paint booth and a respirator because, as will all spray paints (including an airbrush with acrylic paint) this is a foreign substance which is not good for your lungs or brain.
I next applied a dusting of white weathering chalk to tone down the paint colour to make it look as if has been exposed to the elements for a number of years. After all, paint peeling normally takes place after paint has been weathered for several years.
I like this technique for creating a peeling paint effect.