What is Flipping Houses?
House Flipping is a strategy that involves buying a house at a lower price and then selling it again at a higher price within quite a short time period. The sole objective of flipping a house is to sell it on, and as a general rule, the house is not used in the intervening time. The property would not be rented out, as it would if it was buy-to-let, nor would it be substantially developed or renovated.
It can also be called buy-to-sell, and it relies on buying low to sell high.
Why Flip Houses for Profit?
In general, property development is a long-term strategy. Buy-to-let is an investment that can take at least ten years to see a return.
The attraction of house flipping is its short-term nature, taking only a few months to turn the investment into a profit. It can also provide a higher return on investment than longer-term projects.
House-flipping projects also involve much less work than other types of projects, such as property development.
How to Profit from House Flipping
Profitable house flipping relies on accurately judging the buying and selling prices of property. This requires good research, and knowledge of the costs involved in house purchasing.
Your first goal should be to buy below market value. This should be your aim regardless of your investment method, but with house flipping it is far more important. Your profit margin relies on your purchase and sale prices.
There are ways to find properties that are for sale below market value. Property auctions or sellers looking for a quick sale are good approaches here. You may also find good prices by being a cash buyer.
The first thing to be mindful of is the additional cost of purchase. This includes costs such as Stamp Duty, legal fees, and potential interest charges. You will also have to pay Council Tax and utility costs while you own the property.
While house flipping does not involve major refurbishments, due to timescales and costs, there could be repairs needed to ensure you can attain the maximum sale price. Minor refurbishments might be desirable, if they can be completed quickly and improve the sale price.
And then, of course, there are costs associated with the sale of the property. The estate agent may have fees or comission, there could be legal fees and taxes to pay.
The next consideration is the selling price. To estimate your target selling price, you should look at current price trends. With house flipping, your focus should be on short-term price, and whether local prices are rising or falling. This is where knowledge and research will benefit you, as will seeking opinions from local estate agents or looking at the UK House Price Index Data from HM Land Registry.
If you have everything planned correctly, you should be able to have a good estimate of the sale price before you make the purchase, and so know whether flipping the property will be profitable.
When does Flipping Houses Work Best?
House flipping works best when the property markets are warm, which is when there ware more buyers than sellers, and when prices are rising. This increases the chance of selling at a higher price as prices overall will be higher. Added to astute buying below the market value, and any value gained from repairs and improvements, you should be able to find a good return on your investment.
If the markets are cool, in that there are more sellers than buyers, property prices may be falling. You can still find a profit if you are careful with buying and selling prices, but it could be more difficult to do so.
Will Flipping Houses be a Profitable Strategy in 2023?
For house flipping to be profitable in 2023, there are a couple of things to bear in mind.
House pricing trends are important, and whether they are rising or falling will have a large impact on the profitability of any house flipping.
Additionally, if the other costs of house buying and selling change, that could cause a loss in profitability. Interest rate rises, increases to estate agent fees, and so on, would reduce your margins.
In the end, however, it may come down to your ability to find properties below market value, and to estimate the sale value.
Researching these trends and prices yourself is crucial to success, although finding a knowledgeable property advisor would not harm your chances.
