What are the fundamental steps you must know to flip a property – do it up and sell it on for a profit?
Can you get going fast or do you need to spend months and many thousands of pounds educating yourself before getting started?
The great news is that you can get started fast – but you will need to proceed with caution and it is essential to at least speak to people who are successful flippers.
So here are the essential steps to fast forward your foray into flipping….
Step 1 – Select your area
You start by identifying the town or area in which you will be operating, sometimes called your “goldmine area”.
This could be where you live or near where you live. Often the area will be determined by the value of property you will be targeting. It will need to be an area where you can find the sort of properties you are looking for.
Rather than looking at an entire town, you can acquire greater knowledge and expertise by focusing on a specific part of town on which you can become an expert.
You can use StreetCheck to find a wealth of useful information about your chosen area – things like demographics, crime and past sold prices in specific streets or postcode areas.
You can use the price indices of Halifax, Nationwide, Hometrack, UK Home Price Index and the Land Registry to gauge where house prices are heading – up or down or standing still.
Step 2 – Select your property type
Having decided your target geographical area, you should next decide on the property type you intend to specialise in.
The type of property you target may determine your goldmine area; similarly, your goldmine area may determine the type of property you go for.
If say you are targeting properties in the £100k to £150k range you are not going to find many such properties in say London and will need to target those parts of the country where such properties are available.
You will want to find an area where there are many properties both in your price range and having the potential to add value and lead to a profit.
Rather than targeting all properties in your price range, it is best practice to target a specific type of property – for instance Victorian terraces with 3 bedrooms and two downstairs reception rooms – enabling you to acquire in-depth knowledge and expertise.
The more of an expert you become, the better you will be able to identify:
- Properties with the greatest potential
- Properties which are the best bargain
- Properties offering the greatest profit.
MUST KNOW PROPERTY STRATEGIES
Buy to let (buy and hold a property for income and/or capital growth)
Rent to buy (property is rented before it is bought)
Rent to rent (rent property to rent it on for a higher rent)
Step 3 – Find properties matching your requirements
Find properties matching your target by carrying out as much investigation and research as necessary.
The most obvious and possibly the easiest and cheapest way to proceed is to check out the properties for sale on the main property portals: Rightmove, Zoopla and OnTheMarket.
You can also target local estate agents and letting agents.
Another route is to carry out a marketing campaign such as by leafletting or by using social media.
There are two main ways to decide quickly if a property is likely to make a good flip:
- The 70% rule
- The 40-50% rule.
The 70% rule states that you should pay no more than 70% of the ARV (After Repairs Value) minus the cost of repairs needed.
The 40-50% rule states that you should aim to pay 40-50% of the ARV.
The 70% rule is more accurate but the 40-50% rule can be used as a quick rule of thumb without the need to delve too deeply into the cost of works – on the basis that only a light refurbishment will be required.
Step 4 – Purchase the property
Once you have found a property meeting your criteria, the next step is to buy it.
You can purchase with:
- Your own money
- Other people’s money
- A combination of the two.
Other people’s money could include a private loan or a bridging loan.
Relying on bridging loans may depress your profit and will normally carry a greater level of risk. Relying on other people’s money gives you the benefit of leverage.
When is the best time to sell? (timing your sale for maximum advantage
8 fab ways to add value to your home (especially before selling it)
Show off your home for zero cost! (make your home irresistible on the cheap)
Step 5 – Carry out works
Normally you will be looking to carry out repair works using your own money or a private loan.
Step 6 – Sell the property
The final stage in a flip is selling the property and realising your profit. You will maximise your profit if you can line up a buyer – perhaps a buy to let investor – to take the property as soon as it is finished.
It is possible for you to start flipping property without a vast amount of money, property education or training.
To minimise the risk of analysis paralysis, it is good practice to gain practical experience of the strategy fast by honing your skills by identifying and viewing suitable properties using the property portals and other methods.
However, before you start structuring deals and buying properties, it makes sense to ensure that you link up with a property professional or two with successful practical experience of the strategy.
Are you looking to take up flipping as a strategy ? When do you intend to do so? Is there anything holding you back? Please leave your comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com