Often seen on TV property shows, flipping a house is when you purchase a property that may need some improvements, undertake the work and then sell the house on for a profit. It may seem like an ideal way to make money, but there can be pitfalls and difficulties along the way. If you’re considering trying to flip a house for the first time, make sure you take the following three issues into account before you start.
Where to buy?
One of the first things to consider is where in the country to purchase your property. It would be advantageous to have your project close to home so you can oversee or perhaps take part in the renovations, but you also need to consider the local house prices and whether you can make a profit in your local area. It has been reported in the media that the best cities to flip a house are in the North of England with Manchester, Nottingham and Liverpool taking the top spots.
The timeline
It is also vital to decide how long you want the whole project to take. House flipping can be a very lengthy and time-consuming process, from finding the right house, completing the purchase, undertaking the repairs and then finally selling the property, all whilst paying for a mortgage and all the other associated costs. The longer it takes, the more you spend and this will eat into your profits. If, for example, your project is in Berkshire, Ascot solicitors such as Parachute Law, can advise and expedite conveyancing.
Your available budget
You will need to calculate exactly how much you want to spend and stick to this amount. The aim of a house flipping project is to maximise your return, if you spend too much on the property to start off with, then the financial return will be limited. Property experts reckon that the 70% rule should be applied to all house-flipping projects. This means that the purchaser should combine the cost of the property with the amount spent on any repairs and ensure that they do not buy the house for more than 70% of this cost to hopefully gain a profit from the flipping process.
If you don’t stick to this rule, you may end up only getting back what you paid or even losing money. You will also need to consider how you are going to finance the project, some traditional mortgage companies can be cautious about house flip projects. If possible, a cash purchase is seen as an advantage as it takes away any uncertainty about whether you will be able to obtain financial backing. The repairs budget is also very important. Are you going to be doing the work yourself or will you have to bring in contractors? If you are going to be undertaking any of the work yourself, it needs to be up to industry standards or it could end up losing you money if potential purchasers feel that it is not up to scratch. Something to also consider is how long you plan to spend on the renovation, time is money after all, and if you have taken out a mortgage for the project, the longer it takes, the more interest you have to pay.
