No longer is flipping houses something that people do on the weekends for fun. Now, it’s a thriving business that people invest heavily in and can make a good living from. In the UK, between 2016 and 2017, the number of flipped homes rose by 1.6%. In 2018, there were 17 120 homes that were bought and sold twice in England as well as Wales.
However, the market for house-flipping is not limited to the UK. In the United States, there is a boom in house-flipping in the luxury market. According to statistics, in 2018 2.6% of the homes that were flipped were valued at US$ 1 million and above. This grew from 2.2% the previous year.
With so many people getting into the ‘flipping game’, it must be good business. But in order to succeed at any business – the house-flipping kind included – there are certain fundamentals that need to be in place.
There Needs To Be A Solid Business Plan
A business plan is a document that shows outsiders a number of things:
- What your business is about, in other words, if you’re providing a service or selling a product.
- How you’re going to get people in who will buy your service or product.
- How much money you anticipate making from the buying and selling of your service or product.
This doesn’t have to be a 20-page document. It’s just the blueprint that guides you in how you’re going to make money from your business. It’s especially important if you are looking for investors or partners. They will want to see what your plan is in terms of growing the business because the bigger it gets, the more return they’ll make from their investment. You may well not stop at flipping one house, you may invest in another property after a successful sale, or even in several.
With the business of flipping houses there is a very simple formula that you need to adopt:
- Final Selling Price of The House – How Much You Paid For the House Originally – Costs = Profit
So, it stands to reason that if you sell the house for less than you paid for it or how much you spent on it, your profits will suffer. The converse is true. In other words, if you sell the house for more than you paid for it (the original purchase price and the costs you put into it) you’ll make a healthy profit.
To ensure that you profit you’ll need to conduct research into the property market and evaluate current trends. The information that you gather will be the driving force behind your business plan and should form a basis for the entire project.
Have A Great Team Behind You
With the business of flipping houses, there are a ton of tradesmen involved – such as electricians, plumbers and carpenters – who will contribute to a property transformation. Gathering a great team is crucial, and whether you are updating a property by changing fixtures, adding cladding and giving it a coat of paint, or doing a complete renovation, having experienced, registered contractors are key.
To have a successful flip, the contractors you hire need to be reliable and deliver work that’s up to standard. Additionally, they need to follow timelines, as the longer the renovations take, the more it can potentially cost you. Not just in payments to contractors but in rates, taxes, insurance or levies, and any other costs associated with being a homeowner too.
Contractors also need to adhere to all compliance requirements. The last thing that you want is the person who buys your newly flipped house calling you two months later saying that there is a major electrical fault or an issue caused by negligence or sloppy workmanship.
Know-How To Market Your House Well
You can have the perfect flipped house on your hands but unless people want to buy it, you have an asset that’s not making you any money. Put another way, you have to market your house correctly and prepare it for sale.
There is a fundamental marketing principle called the 4Ps, which stand for:
If you get all of these 4Ps into alignment, you’ll have a better chance of getting a good uptake.
How Does This Apply To House-Flipping?
In order for your flipped house to be sold as quickly as possible you should ensure that the following is in place:
- Product: Your flipped house must be a quality product. What this means is that everything needs to be in pristine condition – from the plumbing and electricity to the skirting boards. This comes back to needing a reliable team of contractors.
- Price: You can’t sell your house for a price that potential buyers can’t afford. It needs to be marketed correctly. This means that you cannot overcapitalize on flipping and that your selling price must be competitive with other houses in the area.
- Place: Your flipped house needs to be in an area where people who want to buy renovated houses are keen to live. Renovating a house in a lower income area for a high-end buyer is not going to be a sound strategy.
- Promotion: You have to advertise your house in a place that your target buyer will see it. So, the next question that you’ve got to ask yourself is where these places are:
- Is it social media? If so, which social media platforms?
- Do you target buyers steer clear of social media and rather prefer buying publications? If so, which publications?
- Does your target market prefer watching television?
Once you have answers to these questions, you can determine what advertising channels will yield the best results.
Flipping houses can be very lucrative, but to make it profitable on an ongoing basis, you need to treat it like a business, not just a hobby. There are certain principles you need to adopt to make your venture a sustainable concern but they’ll pay off in the long run.