With demand far exceeding supply in the UK when it comes to residential properties, house flipping has emerged as a solution for fighting against the property shortage as well as for investors making quite a significant profit.
If you have heard about the term before and are interested to know just what flipping a property entails, keep reading to learn what our experienced estate agents in Newham have to say about this hot topic.
If you are in the market for a property to flip for profit or call your home, do not hesitate to contact our estate agents in Newham at 0207 055 0441 for the highest quality service and professional advice.
What you can find in this article:
- What Does Flipping a Property Mean?
- Pros and Cons of Flipping Properties
- What to Consider When Flipping a House
What Does Flipping a Property Mean?
House flipping or property flipping is the process of buying a distressed home and renovating it to resell for profit. According to our estate agents in Newham, the most popular types of homes targeted by house flipping investors are:
- foreclosed properties
- bank short sales
- homes sold at property auctions
The key to a successful house flip is choosing a property that is undervalued and does not have significant structural issues or other problems that may end up costing you a fortune, therefore diminishing your potential profits.
The next step is spending your money wisely. This means carefully choosing to invest in renovations or improvements that are bound to attract more buyer attention and increase the resale value of the home.
Another popular option is to micro-flip a property. This means choosing a home that is slightly pricier but that requires limited renovations. The main advantage of micro-flipping is that the renovations will take less time, allowing you to sell the property faster and move on to the next one.
A home that requires no major repairs or other types of work can be flipped in as little as a few weeks compared to a few months for properties requiring a major overhaul.
The success you achieve with flipping properties is measured in the volume and value of the transactions.
According to our estate agents in Newham, the average profit recorded between 2020 and 2021 for property flipping was around £48,000.
Pros and Cons of Flipping Properties
Flipping property is a real estate investment technique that, like any other type of investment, has both pros and cons.
The main benefit of flipping a property is the high potential for gain. Investors taking up a house flip have a high chance to sell the property for much more than they bought it as 75% of flipped properties are sold for a higher value.
With house prices rising steadily and rapidly in the current real estate market, our estate agents in Newham emphasize that profits for real estate investors and especially house flippers are also increasing.
As high as the potential for profit is, investors considering taking up flipping properties must also take into account the downsides.
As mentioned, 75% of flipped properties will sell for a higher price. However, this also means that 25% of them don’t, leaving investors with nothing or, even worse, with losses.
Flipping projects also entails plenty of uncertainty. The risk of potential losses is higher if you buy a house that you cannot properly evaluate and that turns out to require expensive renovations in order to be sold.
Investing more than you signed up for on costly repairs or going over budget on the wrong updates can quickly turn your profit into dust. Seasoned investors often turn to our experienced estate agents in Newham for free property valuations and help to accurately determine how much they need to put into a property and where in order to sell it for a higher profit.
Rising construction costs are another factor that could affect the profitability of this venture. On average, the cost of renovating a three-bed home is about £75,000. Our estate agents in Newham recommend investors add 10-15% to their house flipping budgets to cover any potential price increases and miscellaneous issues that may arise when renovating or refurbishing a property.
In addition, our estate agents in Newham recommend investors not forget to add tax and administrative costs to their budgets.
Last but not least, many property flip fails are caused by supply chain issues and disreputable contractors that do not manage to properly complete the works they signed up for. This is where an experienced project or property manager will come in handy, ensuring that all the works are on time and up to standards.
What to Consider When Flipping a House
Our estate agents in Newham consider market trends to be among the most important factors to consider when flipping property. You’ll want to have an experienced estate agent by your side to learn more about the potential advantages of one area over another or of one property over another as well as what specific things buyers are currently looking for.
Having this valuable data will help you make informed decisions both when you are buying the property and when you are renovating it. You will be able to select the area and property with the highest potential for profit and invest in the works that will make the property more appealing to buyers, driving interest and the price of the home up.
Some of the main aspects buyers are currently looking for in a home include:
- open areas
- private exterior spaces (garden, terrace, balcony)
- dedicated workspaces
- energy-saving features (solar panels, heat pump, triple-glazed windows)
- eco-friendly/sustainable features
Once the house flip is completed, investors have the option to sell or to let it. There are certain advantages to both options. Selling translates into a faster return on investment while letting translates into a steady stream of income. It ultimately will depend on the investor to determine which choice is right for them.
Our estate agents in Newham are always available to offer professional advice based on clear market data and support investors in making the most profitable decision and also offer top-quality property management services.