Flipping properties in the United Kingdom is more than just randomly buying a rundown property, painting it and selling it for a profit, this is an established business model for plenty of successful investors and here’s the key steps to be aware of:
- Understand the process is a business, not an emotion based property purchase
- Choose the right financing options
- Select locations with high demand but undervalued properties
- Choose properties needing cosmetic renovations but not major structural work
- Learn how to negotiate well
- Renovate on a budget focusing on the essential, easy wins
- Market the property well
- Price competitive
- Start small, stick to the plan and sale up as you gain experience.
This popular property venue can be a great way to make money through buying and selling houses but it’s not a quick win and investors will need suitable cash reserves to start with to get going.
What Flipping Houses Means
To flip a house is to buy the property at a low price, renovate it and sell it at a higher price. The strategy to successfully flip houses is buying them at prices that are low enough to still generate healthy profits after spending on necessary renovations.
It might sound like an easy process or guaranteed money-making scheme but house flipping involves strategy. There is also some risk involved as you might experience losses without proper planning.
The basic mindset to be successful is to understand that flipping houses is a business of buying and selling. It is different from home management and you must learn how to control emotions when making decisions on whether to flip a property. As a smart entrepreneur, the potential to eventually sell at a higher price should primarily determine your decisions.
Choose the Right Financing Option
Sourcing and choosing the right financing option is a vital decision to make for every house flipping opportunity. You need capital to buy the house and carry out the renovations before eventually selling. Hence, selecting a funding source is more than just opting for any available mortgage or loan service. The terms and conditions of the funding source must be favourable to avoid running into debts in the long run.
For most house flippers, mortgages are the best option if you plan to buy and flip for a specified long duration. That is because of their lower interest rates compared to some regular loans. Getting short-term mortgages in the United Kingdom has become increasingly difficult and has affected how people finance their property flipping businesses.
House flippers who don’t like mortgages can try bridging loans. It is an effective method where you secure short-term loans to “bridge” the time gap between purchasing a property and selling another. Smart entrepreneurs sometimes bridge loans to finance the purchase of new property especially when they expect some quick turnovers. Bridging loans usually have a higher interest rate which explains why it is best advisable for only short-term deals.
Identify the Best Area
One of the most important considerations when flipping houses is their location. Prioritise areas with high demand and many undervalued properties.
An approach to achieve that is looking up the prices of similar properties for different locations. By comparing the demands for those areas, you will get an idea of what people are buying. The properties with high demand are always likely to sell for higher prices within a short time.
You can also decide to talk to local estate agents in that area for predictions on the market behaviours. As resident agents, they usually have enough experience and data to identify the fast-developing areas. They can also help with useful strategies to get the best deals in that location.
Some of the factors that determine the desirability and demand for properties in a location are:
- Good transport links
- Proximity to basic amenities
- Low crime rates
- Availability of good schools in the area
Find the Right Property
Once you have selected an area you believe has a high demand for properties, the next step is to find the best property in that location. There are a few factors to determine the right property that can yield more rewards.
Firstly, consider the condition of the property. The idea of house flipping is renovating a property and selling it in better conditions. So it is preferable to buy properties that are fairly presentable and would not require very expensive renovations. Otherwise, you might end up spending more money than the expected income.
The size of the property is another interesting factor to consider. We recommend buying smaller houses as a new house flipper. Bigger houses can be more challenging to renovate without making losses. Opt for smaller properties and expand your deals as you gain more experience.
The last thing is sourcing for professional help regardless of whether you are new to the business. It is always best to talk to a surveyor and get a professional report from them before investing in new properties.
A qualified surveyor is more likely to detect if any structural problems require heavy fixing. Identification of such faults can even help you negotiate a lower price for the house. Understand you will spend money to fix those structural faults whether you discovered them or not before purchasing the property. It is better to have a professional survey the property for you.
Get the Right Price
The simple way to make profits on house flipping projects is to avoid overpaying for a property. Do not rush to pay because you think the deal is good without doing your research about that area. It is a common mistake among inexperienced flippers who think paying immediately is how to secure good deals.
For starters, you can set a maximum price before you start checking around for suitable properties. Having a budget limit can save you from overspending. You must also exercise patience and understand that a deal is only tagged “good” when the property sells for a significantly higher price after your renovations.
The end objective is to sell the property after the renovations and not for your personal use. Having that in mind helps you make better decisions and walk away from properties that you consider too expensive. There will always be alternatives that sell for an even cheaper price. You just have to keep searching.
Tips for Buying Properties for Below Market Value
There are two ways to get the best possible purchase price for a new property. Understanding these strategies can help you achieve a successful house-flipping career.
1. Utilise Property Auctions
Auctions are excellent opportunities to buy properties at a lower price that promises much profit. Consider the following when buying a property at auction:
- Get a mortgage agreed in principle or be a cash buyer
- Have a realistic budget – be specific about the maximum amount you can afford to spend
- Bid early – do not rush to close deals without proper research about the property.
- Be prepared to walk away – no property is so special to command an unreasonable selling price. Be able to walk away and know that you will find another property.
You can always search online or keep in touch with the local authorities for upcoming auctions.
2. Buy Off-Market
The other approach to buying properties below the market value is to buy off-market. Another way to explain it is buying a property that is not advertised for sale. Getting such properties can be more difficult, but when you find an opportunity, there is often less competition to navigate.
Three ways to find off-market properties are:
- Searching for probate properties – when someone dies, their property is usually sold to cover the cost of their estate.
- Contacting absentee owners – you can attempt to reach out to people who own properties they don’t reside in. They might be willing to sell it off at a lower price.
- Asking local estate agents – local housing agents in your preferred location would probably have inside information about properties for sale that are off the market.
Identify Buyers’ Needs
Identifying your target buyer persona is important when flipping a property. It guides your decision-making process and the type of changes or modifications you make to the housing property.
A house flipper with families as the target buyers will try going for only properties that are close to amenities like a good school. The preferred houses must also have enough bedrooms. Conversely, flipping houses to sell to young professionals requires getting a home located in a lively environment with good transport links.
It is easier to make perfect house flying decisions once you know your target buyer and the general preference for people in that group.
Renovate on a Budget
Ideas to renovate a house can sometimes be endless and you might be tempted to overspend – so it’s always necessary to have a budget when renovating a house for flipping purposes. Go in with a list of the necessary structural changes and cosmetic modifications needed to bring it up to a salable standard.
Any other ideas you have for improvements outside of this initial list are secondary and should only be considered if it does not take you over your renovation budget. .
Some examples of items for your renovation list include the costs of:
- Fixing any structural problem
- Making cosmetic changes such as painting, redecorating, and installing new fixtures and fittings.
- Replacing old carpets and flooring
- Updating windows and insulation
Curb appeal is the priority when trying to sell a property at a very good price. You have to make the property aesthetically pleasing to the public. It is usually the simple things like cutting the grass, planting some flowers and trimming existing ones. There is a higher chance to make a profit when the house markets itself to potential buyers.
Promote Your Property
Promoting your property to the target buyers comes immediately after you complete the renovations. It is the perfect time to showcase the property either through online estate agents or traditional ones.
The best promotional strategy depends on the target buyers but online estate agents are usually cheaper than the traditional ones. Online promoters also have a wider reach and can get your housing property listed on every major real estate website.
Social media advertising is another promotional method. With billions of active users, you can create a social media account for your house-flipping business and post pictures or videos of the houses.
Staging the Property Effectively
First impressions greatly determine the final decision of a buyer. That is why we encourage you to properly stage your housing property. Find the best way to make the house very appealing to interested buyers.
Here are some simple ways to do that:
- Furnish the property with new furniture
- Make sure the property is clean and tidy
- Add finishing touches such as fresh flowers and scented candles
- Make sure there is plenty of natural light
- Upload only high-quality photos of the property
- Use a professional photographer
Additionally, consider having an open house where potential buyers can come and see the property. It is an interesting way to increase interest and engagement in your flipped houses. You might even be able to trigger a bidding war among the attendees.
Understand Taxes and Other Fees
Buying and selling houses comes with the need to understand the taxes that accompany this business venture. The following are important terms that you must know about tax and fees as a house flipper in the United Kingdom.
- Capital gains tax: this is the tax on your profit from selling a property. The capital gains tax is 18% in the UK for lower-rate taxpayers and 28% for higher-rate taxpayers.
- Stamp duty: refers to payable tax on all properties that exceed a stated price threshold. For the UK, the rate is 2% for properties above £125,000, 5% for above £250,000, 10% for above £575,000, and 12% for above £1,500,000.
- Estate agent fees: you become liable for these fees if an estate agent helps you sell the property. It is usually an agreed percentage of the sale price.
- Legal fees: these include fees paid to a solicitor to handle the legal aspects of the sale process such as transfer of ownership of property and drawing up contracts.
Understanding these costs and introducing them into your budget prevents you from spending your profits before sales. It is important to track all expenditures in your renovation budget to avoid overspending.
Final Thoughts
The secret to successfully flipping houses in the UK is doing your research, having a budget and identifying the right target buyers. When combined with the right strategic approach and commitment, it can become a rewarding venture.
One of the biggest hurdles is being able to manage your finances well, stick to budgets and account for all costs that could come up including renovation, taxes, fee, and unexpected issues.
With dedication and the ability to adapt, house flipping can be both financial and personally rewarding.
