18 June 2012
Back to Bread & Butter:
How to Flip A Property for Profit
How to Flip A Property for Profit – The 4 Ways to Buy & Sell for Profit in a Tough Economy
Right now in the Property Investing Landscape, a few underground investors are making large chunks of cash [sometimes a years’ salary in one deal], flipping properties
They buy, they [sometimes] refurb or renovate, they ‘flip property’ back onto the market
BUT a word of warning…
In the current financial climate the risk is the declining market and the slow sales through Estate Agents
You could buy, sell and l o s e money, or have to rent and subsidise the rent
BIG problem for most [first time buyers – FTB’s, Owner Occupiers – OO’s & newbie investors]
A HUGE contrarian opportunity for well educated investors, IF you get it right So here are the 4 ways to do it properly, professionally, & profitably:
1. Find it BEFORE it gets listed in the Agents’ window or goes to market
The ONLY way in this category to get the deals cheap enough to sell on, even with 10% of sale price factored in for costs, is to buy them without competition from the above
So how do you do that?
You befriend the Estate Agent. Best be-friend!
That’s a whole other topic. But believe me, the best, hungry ones get hold of the listings before they are ever listed, and hive them off to their ‘banker’ investors weeks before they hit the window, AND they divert attention AWAY from your deal, so no one else can bid it up
2. Out of area Auction
Most people go to their local auction. Makes sense right? And you should.
Watch. Observe. Keep your hands FIRMLY in your pockets.
Don’t even scratch!
If you go to an ‘out of area’ auction, where properties are listed in your town or city, in another [preferably far away] town or city, your competition [which is what causes the price increase] is often NOT there
Quick tip. Don’t bid, and let them fall short of the reserve. Then go sniff them out. As long as you know your maximum price and NEVER exceed it, you’ll get deals. We rarely buy properties through our LOCAL auctions!
3. Buy really ‘dirty’ properties
The more apparent [yet fixable] problems there are, the less competition.
Absent freeholders, subsidence, lease issues, smelly-dirty-mouldy, you name it – what turns someone else away removes your competition and keeps the price low.
The bigger the ‘problem’ the bigger the upside, but the higher the risk if you don’t know what you’re doing. Start with properties that look awful but only needs cosmetic work. Build up from there as you get educated.
Don’t take on structural work until you’re experienced
4. Areas with ‘Spread’
Most people chase the discounts and prices, without learning the ‘ceiling value’ in any given street. What’s the ‘ceiling value?’
It’s the price of the highest value ‘comparable’ house on the street.
Let’s look at some numbers –
Your 3 bed property – £70,000
Highest value comparable 3 bed property – £85,000
Maximum value you can profitably add – £15,000
Your 3 bed flat – £60,000
Highest value comparable 3 bed property – £100,000
Maximum value you can profitably add – £40,000
It would be better in this case to buy property b. at ‘market value’ than Property a. even if you managed to buy it at a 25% discount at £63,000
Some work, some don’t. It’s simply a case of knowing your local areas, finding the streets with large ‘spreads’ between achievable prices and ‘ceiling values’ and buying there, and only there
Then you can offer less off asking price [which is irrelevant anyway] and get bigger real comparable discounts and larger uplifts in value
Any questions or comments? Please reply below
…and if you like this, please share it!
Rob Moore & Mark Homer
Co-Founders of the Progressive Companies
Full Time Property Investors
Double Best Selling Property Authors
Over 350 Properties Bought & Sold
© Progressive Property Education LLP 2011