In simple terms, ‘flipping’ a property is purchasing a property at a set price, and selling it on at a higher price than you paid for it (normally within a relatively short time period). Some people refer to it as ‘buy-to-sell’.
How do I achieve ‘the flip’
As you require to sell the property on for a higher price refurbishing the property is more often than not the reason it increases in value. However, on the odd occasion you can find a real bargain at a greatly discounted price, you may be able to purchase, not complete any work, and put it back on the market at a higher price (some people can market a property better than others!).
Ordinarily, some refurbishment work to add value to the property is the common route, which is what we will focus on.
Why would I want to flip a property when I can retain the property and add it to my portfolio?
Flipping is a process whereby you can generate a large amount of cash in one transaction. You could retain the property and rent it out each month as a BTL (buy-to-let) and cash in your big lump sum many years later, when the property value has increased, but with a flip you can generate cash in a short time period, even as quickly as a few months. Although, it should be noted that there are limited mortgage lenders who will allow borrowing against the property until the ownership has passed the six month mark.
It’s often the case that property investors need to raise quick cash for other projects, and flipping is definitely worth the consideration if you find yourself in that situation.
What kind of return can I expect on my investment?
In a nutshell this is how it works:-
If we use the following example:-
- You purchase a property for £150,000
- You spend £25,000 on refurbishment
- You sell the property for £225,000
- Profit Achieved = £50,000
- ROI (Return on Investment) 0.29% return
*ROI calculated based on finance coming from one source
How do I make this happen?
Finding the ‘perfect’ property to flip at the ‘perfect’ price is always a challenge. That is where REIP UK Ltd can step in and help, and it’s the hardest and most crucial part of a successful flip project.
REIP UK Ltd can source you a ‘specific’ property type in a ‘specific’ location, suited to your requirements for the project. Once we know what you are looking for, we get to work on finding the perfect investment opportunity.
It’s crucial that the property you purchase is located in an area that will sell once you have completed the project. It may be the case you are looking for specifics such as a large driveway, but if the area doesn’t suit your other needs, it can make or break a profitable investment. It’s important all the boxes are ticked before you invest.
If you have the bravado, tackling a project that has slightly more work than just a straightforward refurbishment can be very profitable. Such as a property that has some structural damage, but it is easily rectified with the right trades people. Always add in at least 10% to your budget for contingencies as there is always something unexpected that comes up on a property renovation.
Here at REIP UK Ltd we have access to highly skilled professional tradesmen, and we can project manage tradespeople on your behalf. This gives our clients peace of mind when they hand over the refurbishment to us! Renovation costs are an important part of the entire buying/selling process, and we can make sure that you stay within budget for your project.
Time management on a project can be another major factor as to how much profit can be achieved. REIP UK Ltd can time manage your project to make sure the schedule is on target, but not taking too long. As Project Managers, we keep you up-to-date with regular updates on progress.
Consideration can always be given to adding an extension, converting a garage, carrying out a loft conversion, or simply finishing the property off to the highest of standards for sellability.
Ready to sell
So you have completed the hard work, and now it’s time to get the property back out there to potential purchasers.
To achieve a healthy profit margin you want to sell at the best price possible. Be realistic about what you can market and sell the property for, conduct thorough research and produce comparables on the area and property type.
Consideration then needs to be given to Stamp Duty fees. Professional fees such as solicitors’ fees (purchase and sale transactions), Estate Agency/Property Platform fees, Mortgage Broker fees, and any surveys/Home Reports that are required.
If you would like to discuss the possibility of REIP UK Ltd managing your flip project why not get in touch with a member of the team today:-
0800 2465 274