Flipping a property, where you buy it cheap and sell it on at a profit, is almost a traditional way of making money. In terms of earning a big lump sum in one go it’s hard to beat, especially when compared to the slow profits made from buy to lets. Depending on the amount of refurbishments you have to do, that lump sum could be yours within months, as long as you’re smart about the properties that you buy. From buying the right property to making sure that you get the highest profits possible, here’s our quick guide to flipping a property for profit.
Choosing a Property to Flip
Your first task is going to be finding the right building. The majority of property flippers target private homes, but commercial properties are just as viable. The key areas to think about are:
- Property Type: You want the property that’s going to be appealing to the highest number of people. A good rule of thumb is to stick to three-bedroom semi-detached homes. That’s because these can appeal to both first-time and second-time buyers.
- Location: Look for areas where properties are being purchased by people planning to use the property rather than investors. If you’re buying homes then look for local schools, good transport links, and economically active businesses. The more you know an area the easier this will be, so do your research.
- Reasons for Selling: The more work that needs to be done to make the property usable, the more profit you can usually make when selling it. Don’t look for properties to flip that are already in mint condition. A Brief Guide to Flipping Property for a Profit
The Money Factor
You will usually struggle to get a mortgage for a property if you’re planning to flip it. A lender may allow you to do this once, but if you plan on flipping homes as a regular revenue stream then they will start to deny your mortgage application. Ideally, you should offer to pay in cash, but you can also opt for bridging loans (the most common option for property flippers). Once you have your finances sorted, you need to crunch the numbers on the property you’re looking at. You need to evaluate the sale price, the refurbishment and tax costs, and the price that you believe that you can sell the property for. Don’t forget that you may pay additional fees to realtors, so factor that into your calculations.
Doing the Refurbishment
For most property flippers this is the fun part. Walk through the property with tradespeople and get firm, clear timelines and cost estimates for every single change that you want to make. If you’re doing a quick paint job and replacing a few kitchen cabinets then this is going to be a quick and easy part of the process. For more extensive refurbs, look at more creative and high-tech ways to get the changes made that you think will suit the property best. Some options, like fully realized 3D home designs, can be very useful for showing to prospective customers who will be more likely to buy that property if they can see what it will look like when the refurb is done. The work itself will then have to be done, and that means either:
- Doing the Work Yourself: If you have the skills then you can save a lot of money by doing the electrics, plumbing, or heavy-duty tasks that need doing.
- Contractor or Individuals: If that all sounds beyond you then you will either need a main contractor to do all of the jobs you need doing or individual tradespeople to do each task. Check the overall cost of both options.
If you’re using professionals then always remember to agree on a timeline, keep checking in with the team, and schedule your payments.
Selling the Property
This will be the moment where all of your research and hard work will pay off, but you need to get it right. Selling a home or a commercial property can take time, and you will want to earn your profits as quickly as possible. There are countless guides to selling a property more quickly, so it’s worth doing a lot of extensive research into this well-documented activity. However, the basics that you need to know are:
- Staging: When prospects come to view the property, make that viewing an experience. The goal is to make it easier for those possible buyers to picture themselves living in or using that property. You want the floors to be clear, the space to be as tidy and clean as possible, and get rid of any personal identifiers like family photos. There are some additional tricks and tips like boiling some coffee or baking some bread to make the property feel more lived in, but don’t rely on these strategies.
- Curb Appeal: Realtors love talking about curb appeal. It refers to the fact that it only takes a possible buyer a few seconds to decide that they don’t want to buy a property from the moment that they see it for the first time. That’s why you need to make that first impression count. Tidy up the front lawn, get rid of any trash, and repaint the front door (or even the whole front wall). The goal is to take their breath away when they first see the property, so it’s worth putting a little extra effort into curb appeal.
Flipping a property might seem very simple, but there’s always going to be something to learn from your experience. If this is your first time buying and selling a property there’s a good chance that you made some mistakes. Make sure that you recognize those mistakes and are aware of ways to avoid repeating them. Walk your way back through every stage of the process and identify what you’d have done differently. If your experience has been positive and you’re keen to try again, then knowing the potential dangers will make it much easier to avoid them and your profits will be more likely to make the hard work worth it.