House flipping is the practice of buying a house at a low price, and selling it quickly for a higher one. It’s a practice that’s perfectly suited to those with an eye for a bargain, who are willing to build their knowledge and trust their instincts. Often, flippers will pick up their property at auction, having spotted some quality in it that others have overlooked.
Flipping properties can yield a fast profit – but if there are unforeseen delays, it can quickly go from profitable to disastrous. As such, it’s worth looking at the practice closely, and seeing where common errors might be committed.
Researching a property
If you’ve done the appropriate groundwork, you’ll be able to judge more accurately whether you can make a profit on a given property. Look for properties which match your purchasing power. If you lack experience in a given area, then you might collaborate with estate agents, who might provide you with guidance.
When you’re new to flipping, it can be difficult to accurately set a budget. You are almost certain to run into unforeseen complications along the way, so it’s always a good idea to give yourself some wriggle room.
Financing the flip
If you have a sizeable chunk of savings to draw from, then your entry into the world of flipping might be a little less painful. You might seek to finance the purchase, either in whole or in part, with the help of an outside creditor. Bridging loans might be an option if you need cash quickly – but these tend to be high-interest. In much the same way that it would be expensive to live for months in a hotel room, you should avoid relying on this form of finance for long periods.
Plan the renovations
If you have the skills you need to carry out the renovations yourself, then you’ll be able to save a considerable amount, which means more profit for you to keep. Tradespeople and keen DIYers therefore make good property flippers. However, in these cases you’ll have to consider the additional expenses to buy the appropriate personal protective equipment to protect yourself during the renovations and tools to carry out the job.
You can put the property on the market before you carry out the renovations – but you should make sure that everything is planned out. Any delay might be expensive, as it may sink a potential purchase.
Make the property presentable
Before you sell, you’ll want to ensure that the property looks as good as it can. For the sake of an afternoon of cleaning and tidying, you might add thousands to the potential value of the property.
Set your price
Getting the price right is critical. Your price should be informed by your initial research, and your assessment of the local competition. Broader macroeconomic trends, like the prospect of future interest rate hikes, might also feed into your calculation.