Photo by Nathan Fertig on Unsplash
Flipping property is becoming popular with people looking to earn money through property. Spurred on by a raft of TV shows showing people buying, renovating properties, and making a lot of money, the house flipping sector is really taking off.
So what is house flipping? In simple terms, it is when someone buys a property at a reduced rate, often at auction or because it is in need of work, renovates it and then sells it on at a profit.
With the right insight and experience, it is possible to make good money from this, but there’s also a risk that you will lose it too and end up with a property you can’t sell and will have to try and rent out to cover your costs.
Develop an understanding of the property market
The property market is complex, with many nuances and concepts to understand. Having a good grasp of building codes, mortgage rates, tax efficiency schemes, the Home Buyer Rebate, and energy efficiency grants is just the start. Before you invest any of your own money take the time to learn as much as you can first.
Have money to spend
Most property developers need to get a mortgage to buy that first property. Some will be lucky enough to have cash but it’s not that common. Besides the cost of buying the property, there are the down payment and renovation costs too and these won’t be covered by your mortgage. You’ll need to pay for these and it’s a good idea to have the funds available rather than relying on expensive credit.
Do your research
Good property developers know a good deal when they see one and it’s not always based on the lowest price. You can’t do enough research when it comes to the property market.
Research the history of property prices in the area so you know how much you can potentially sell a property for. Once you know the upper ceiling you can do the math on the renovation costs and house price and ensure that it will be worth it.
Prices in less desirable areas may be extremely tempting as they are very low but no amount of decorating is going to make people want to move to a bad area. Instead, try and pick up run-down properties in more popular areas or those undergoing redevelopment and likely to increase in value.
An area with a large number of homes for sale should start ringing some alarms. Why do they all want to move? Look into crime stats, employment, or new developments to see if you can find out why.
Once you’ve done the surface-level research, it’s time to start a deep dive into schools, transport links, and other amenities.
Don’t overcommit on your first project
Every property will be a learning curve, so you’ll want to start off nice and easy when it comes to the work that needs to be done on it. A simple repair, repaint, and kitchen and bathroom installation is a good starting point. As a new property developer, you might become overwhelmed if you need to do extensive structural repairs or start reconfiguring layouts.
Have a trusted team of contractors
Doing as much of the work as you can is a good way to keep costs down, but you are going to need good contractors that you can trust to do a good job for a good price. Remember, keep fixtures, fittings, and decoration tasteful and neutral, you aren’t designing this property for you, but for someone else who will come in and put their own stamp on it.