House flipping means buying a house, increasing its value and making a profit on it, put simply buying at one price, then quickly selling at a higher price. ‘Flipping’ generally involves refurbishing the property.
Obviously there needs to be a reason why the property can achieve a higher sale price. With ‘flipping’ the purchase and sale are usually only months apart and so capital growth can’t be included. Therefore refurbishing the property is normally part of the flip process. There might be a rare occasion you can increase the value with other scenarios, such as extending the lease or resolving a legal issue, but these are unusual.
We’ll look at the basics you need to look out for in finding a suitable property.
Which area should I be looking at?
When you get to the end of the project, you’ll want to sell it as fast as possible so look for areas where you can see that the market is moving quickly.
You’ll also want it to be an area where properties are selling to owner-occupiers. Investors will be looking at a bargain price and be more ruthless making sure they don’t go over budget. Home owner-occupiers will be more emotionally committed to a property, and are more likely to pay more than they originally planned if they really want it.
Talk us at Adam Hayes, ask which areas properties sell as soon as they come onto the market. We may even have one just on. If not register with us. Be the first to hear when one hits the market.
You can check this for yourself too. Keep an eye on property portals to see how long after a property is listed it starts showing as “sold subject to contract”.
If you know a place reasonably well you can probably predict the areas where property will sell quickly – but do double check this with your research.
What sort of property should I be looking for?
The ideal property to flip will be one that appeals to the largest numbers of buyers – because you want to sell quickly, and you want to have people bidding each other up.
A two or three bedroom house could be ideal, because it could apply to both first and second-time buyers. Flats can work too, but it may surprise you to know that bungalows are an excellent option as there aren’t so many of them. Buyers of bungalows also tend to want it already refurbished so they can just move straight in, which works even better as a flip project.
Basically you need to be looking for a property that needs work doing. Ideally one at a low price.
So, now the all-important bit. How do I make money from flipping?
It’s a really simple maths equation.
Profit = Sale price – purchase price – costs
So if for example:
Purchase price: £500,000
Costs (refurb etc): £70,000
Sale price: £600,000
Profit: £30,000
It is of course the costs that you need to keep a very tight grip on. Not just the actual price of refurbishments, there’s the legal fees, stamp duty, estate agency fees, the interest on the loan and any capital gains tax that you will be liable for in the event that you make a profit.
This makes all the difference. Do your research thoroughly.
If it's something you’re interested in, get in touch with your local Adam Hayes Office. We’re not only knowledgeable about our area but have access to every property listed throughout the company. It could be a flipping new venture. For investment advice, please call our sales team on 020 8445 4008 who will be delighted to offer any advice.
