Making money from renovating a property and selling it on can be a lucrative activity. Perhaps you can find a bargain property at auction or see the potential in a property that others may have overlooked and love the idea that you could make a lot of money quickly. The aim of flipping a property for profit is to buy it at a good price, carry out some improvements and sell it to make a profit, ideally within 12 months.
Property flipping is a well-known investment strategy, but it can be risky. Proper planning and preparation are important, as is going into the process with your eyes wide open. That’s where Cosey Homes can add real value. Our team of Chartered Surveyors, structural engineers and building engineers have a wealth of expertise in properties of all types and can provide valuable expert advice and guidance when you need it most.
If you’ve always wondered whether doing up a property for profit is for you, here’s how it works.
Arguably, the most important step in the process is the one before the first step. The more research you can carry out, the better prepared you will be. Your projected profit will depend on the project’s overall costs, including the purchase price, so start there.
Research your favoured locations and how much homes will typically sell for there. What constitutes a bargain and are you sure you’ll be able to sell the property on quickly for a high enough price to make a worthwhile profit? Speak to local estate agents to get a feel for the market.
Next, work out your refurbishment budget, what exactly needs doing and how long it should take. Take advice from building experts, including surveyors, builders and tradespeople, to help you get a clear idea of the scope of the project you would be taking on.
Take advice from your accountant or tax adviser to find out how much it will cost in stamp duty and other fees and whether there are ways to minimise your tax liabilities. The main risk of property flipping is getting the financials wrong. If the project is costing a lot more, or taking a lot longer, than you originally bargained for, you may be working for no profit at all.
Once you have a clear plan and know the exact funding requirement, your next step is to put your finances in place, both for the purchase of the property and for refurbishing it. Cash buyers have the advantage here, since no borrowing will be required, which means you can proceed immediately. However, do check that tying up your cash in a property project doesn’t leave you financially exposed elsewhere, and be sure that this type of cash investment generates the best return.
For those without sufficient cash reserves, sourcing appropriate finance will be the way to go. Borrowers should be aware that neither residential mortgages nor BTL mortgages are designed for short-term property flipping, so you need to find other avenues to borrow money.
One popular option is bridging loans, effectively a type of short-term mortgage that enables you to bridge the gap between its purchase and eventual sale. Many investors use some of their own cash and top up the remaining amount needed with a bridging loan. Beware that interest rates for short-term bridging loans will be high.
Having got the finance sorted and bought the property, it’s time to get started on the home improvements. Your research should have already identified your target buyer, say young professionals or families, so make sure that your refurbishments and decorations cater to their needs and tastes.
Be realistic about what you can do yourself and where you need the expertise of specialist tradesmen. Will you manage the project yourself or get a contractor to oversee the project? Controlling time and money are key in any build. You need to keep a close eye on how the project is progressing, making sure it comes in on budget and on schedule. If project management is not your skillset, you won’t be saving money by doing it yourself.
Choose materials, fixtures and fittings that are in line with your target market’s expectations. Putting top end bathroom fittings into a student house is money down the drain, while sub-standard fixtures and furnishings in an elegant Victorian semi may put buyers off.
With the hard work done, it’s time to finally cash in on your investment. But in order to achieve the maximum price, the property must be well presented and marketed. Dressing the house or flat for sale may mean having to style the interior to make it feel homely. Approach the sale of your investment property like a housebuilder would a show home and you can’t go far wrong.
Consult a local estate agent to get the pricing just right. The market may have changed since you did your original research. Check comparable properties sold recently to see whether your price assumptions are still correct and set an asking price that is low enough to pique interest but high enough to generate a healthy profit for you.
At Cosey Homes, we can help with Residential Valuations, Property Surveys and Specific Structural Inspections to provide professional appraisals of the market value and condition of the property asset. As experienced valuation and structural specialists, and fully RICS regulated, we are ideally placed to empower you with the necessary information to help you make the right decisions about your property investment. Contact us on 0330 053 5823 or send us a brief enquiry and we’ll be happy to be of service.
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