Flipping or real estate investing involves purchasing property with the intention of selling the property to make a profit when there is a price appreciation. Sometimes the appreciation of the property comes from the renovation of a dishevelled property and giving it a facelift along with the installation of the latest features and amenities. The new price then reflects a new property in a better state. Many investors are able to generate a stable income flow from frequently flipping properties. Flipping a house is simply buying low and selling high. The closer the timeline of the flipping, the better because each day that passes results in costs such as mortgages, property taxes, insurance and so on.
House flipping is by no means predictable, anything can happen and sometimes you might have to sell at a loss, or with no gain especially when a property takes too long to sell. But the potential of massive profits to be made from a single successful flip makes it so that people keep trying. Due to tax changes in the UK, and the paucity of available properties, house flipping has become a lot less popular but house flipping still has a lot of potential to bring back an appreciable ROI. If you think you might be able to flip successfully, here are a few tips to improve your chances.
What you spend on the house is as important in making sure you profit as what you sell the house for. Maybe even more important. In buying a home that you want to flip, keep the costs as low as possible. Don’t rely on the capacity to rake in huge profits from selling a renovated house. Buying cheap will save you quite a lot. Buying cheap will also cushion you from the expenses that have to be made on the home and any other hidden or extra expenses that might pop up along the way. Aim for property that is neither high-end nor low-end so that it can appeal to a wider market. Estimate the selling price of the home after renovation, and subtract the renovation costs from 70% of that figure. That should be the maximum you should pay going in.
Make sure it is within your financial means
Financing can be a huge obstacle to house flipping. Majority of lenders would rather lend money to home occupants. They are usually only willing to lend money to home flippers if you can demonstrate experience at buying and selling homes for a profit. So if you are new to house flipping, you might not be able to secure financing and can only work with your own money. Also, remember to factor in the penalty for paying back a loan too early when considering financing.
Don’t expect to renovate yourself
Unless you are a professional builder, you need to have a team of handymen at the ready before you start renovating. Watching shows and DIY videos might give you the impression that you can do it by yourself but it is always better to let the professionals handle it. A flawless renovation is highly reliant on the quality of the tradespeople that you use. Factor in the costs for high quality, time-efficient work and be willing to pay to get it.
Be prepared to commit a lot of your time
Renovating a home is a time consuming project and unless you are willing to hire a project manager to oversee the process, then be prepared to spend a lot of your time inspecting and overseeing a lot of the renovation being done. If you have a full-time job, and a family then you might not have the time you need to ensure a successful renovation. Committing an hour a week to the house under renovation might not be enough.
Location is important
In trying to find a cheap house to flip, don’t fall into the location trap. Sometimes a house is cheap because no one wants to live in that location. Find a property that is in an area with a high family appeal, and if possible find a home in a location that is close to you to make your inspection duties easier.
Keep it business
Don’t get personal or fall in love with a house you want to flip. Falling in love with that home can result in you making unnecessary upgrades that will bite into the profit that can be made from the home. House flipping is a business that comes with business taxes so keep all your dealings cold and calculated.