How to Flip Houses Profitably
One of the fundamentals of successful house flipping is good research. You need to estimate the likely buying and selling prices – and all the costs involved with both – in order to ascertain if a flip is likely to be profitable.
Look to buy below market value. You should always aim to buy a property under its full market value in the first place. By aiming to resell at the market value, this offers potential for a profit margin.
Buying below market value is sometimes possible by buying at a property auction. You may also be able to buy under market value by being a cash buyer, and buy from sellers who want or need to sell quickly and so who are willing to sell at under market value.
Estimate buying costs carefully. Estimated likely legal fees, the Stamp Duty you will need to pay and any other costs such as finance charges and interest.
Also, allow for any costs you might incur while you own the property such as utility costs and insurance and possibly Council Tax.
Estimate selling costs carefully. Estimate likely estate agent’s fees or commissions, legal fees and any taxes such as Capital Gains Tax you might need to pay.
Estimate any repair and refurbishment costs carefully. House-flipping projects generally do not involve major work. This is because major works can involve uncertain timescales and costs which affect the viability of the project. However, by flipping, there may be some repairs that you need to do before reselling the property. Or you may opt to do some minor works, such as minor refurbishment or redecoration, which will help to add value and/or sell the property more easily.
Consider price trends. Estimate a likely selling price. With house flipping, you need to consider property prices in the short term rather than the long term. Check whether local property prices are rising or falling (and by how much) or are staying flat. UK House Price Index Data from HM Land Registry can help with this. You could also obtain opinions from local estate agents.
When considering local price trends, also look at whether there are any other factors which might affect local property prices. For example, a new road connection or a new large employer moving into the area might lead to a rise in prices. A large new build housing development or a larger employer closing down might cause prices to stay level or even fall.
Time everything carefully. To be profitable house flipping projects must be completed within a short time period. This reduces the cost of financing the project and reduces the risk that the property market will change substantially before the house is sold.
In a period of falling property prices aim to buy towards the bottom of the fall in prices and resell once prices start to pick up again.
You might also aim to buy when you can buy at the lowest price and sell when you can potentially sell at the highest price. For example, buy before Christmas and sell in the spring.
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