The ability to flip a property is of the essential skills every property investor should have in their closet.
As with all of the strategies that we teach there is both a right and wrong way to go about flipping.
If done correctly you can quickly add cash to your bank and rinse and repeat. If done wrong you’ll have big cash lumps tied up or hefty mortgages to pay months after you’d planned.
Below are 6 tips detailing how to make money flipping property.
Flipping Tip #1 Aim for a Minimum 20% PROFIT
When you are looking for properties to flip always look for a minimum of 20% return. If it looks like you’ll make drastically more you are probably being unrealistic and should take a closer look at the figures. If you are buying below stamp duty (£125k at the time this went to virtual print!) a £30k gross profit will net you between £15k and £20k.
If you are flipping property in London you should be able to achieve much higher figures.
Flipping Tip #2 Inside or Outside London
You should be looking at 3 bedroom properties around the £100k mark that can be refurbed and flipped on for less than the stamp duty barrier. Buying at 90k, refurbing for 10k and selling for £120k would be a good deal. If you’re dealing in London you’ll have a tougher entrance point (tons of competition and vastly more expensive) but an easier exit (fast rising markets).
It’s difficult to time perfectly but seasonal market changes can add additional money to your bottom line. Try to exchange, complete and refurb during winter and market for sale during spring/summer.
Flipping Tip #3 Good Flip or Bad Flop?
Try to be the glass half full person. Always enter the market thinking it will take longer and cost more than first estimated. Be a “Mark Homer” of the world. If you can’t at least make a 5% net profit on a flip in the worst case scenario look for a different property. What I do is come up with 3 different scenarios; best case, likely case, worst case. Hope for the best but plan for the worst
For every “best case” flip you do you’re sure to have a “worst case” flip. Most people fail, and subsequently lose money, by having happy ears and not accounting for all of the problems that may inevitably occur. If you’re best case is £30k profit, your likely case is £15k profit and your worst case is £5k profit then you’ll end up with £50k profit over 3 flips.
Most people enter the property ‘flipping’ business with happy ears, full of enthusiasm. After they encounter problems (and unexpected costs and delays) the enthusiasm’s long gone and they declare flipping property isn’t for them.
Flipping Tip #4 Stick or Fly?
Always refurb with your ideal buyer in mind. To get the top price you want someone to fall in love with the property. Don’t refurb with your personal taste in mind. Market your property to the widest possible audience. Ask local estate agents what their clients are demanding.
Why are some of their listings sticking and some flying?
Flipping Tip #5 Rewarding Your EA
Do you want your property to be viewed more and sold quicker than similar properties? Reward your EA. I’m not talking about sneaky backhanders.
- Don’t haggle on the fees (who’s property are they going to push now :))
- Offer them a key (They can do “on the fly” viewings with vendors)
- Keep their board up for them until completion (free marketing :))
Keep the estate agent on your side. They can be the different between a 2 week and 52 week sale. And that is what will make or break a property flip.
Flipping Tip #6 Good Flips Find Cash
Good property flips find the money whether it’s your cash, the banks’ or a JV partners. A ‘lack’ of money should never stop you from buying a BMV property to flip. A good deal finds finance. The better the property flip the lower the risk for your partners.
And remember every area is different – some work very well for flips, and others not so well – and it’s important to be able to spot the difference before diving in and making costly mistakes.