Property is one of the highest growth and lowest risk investment methods in the UK for those with cash to invest who want to make their money grow.
However, the Conservative government has recently disincentived second home ownership and landlords are under increasing pressure with higher tax burdens and crippling mortgage rates This means alternative ways of investing in property are becoming more appealing, including home flipping.
Not just for fans of the BBC’s Homes Under the Hammer programme, home flipping accounts are amongst the most popular on Instagram, with old and young people alike turning their hand to property development and investment.
What is home flipping?
Flipping is when someone buys a home for the purpose of doing it up to add value and then selling it on, usually making a tidy profit. It is usually the domain of cash buyers who can pick up properties cheaply at auction or who buy outright but have the cash to spare to renovate the property. This is all done in a short span of time, usually 6 to 18 months.
Due to the amount of work involved, house flipping is usually done by partners to pool finances and share the administrative and renovation burden between more shoulders. It can also be a great bonding exercise. If you are considering flipping houses with someone, it may be worth considering setting up a deed of trust with the help of a reputable legal firm such as https://www.parachutelaw.co.uk/deed-of-trust. This will help to avoid any pain further down the line when it comes to selling or if you run into issues.
Let’s take a look at the common pitfalls of flipping:
Not planning ahead
By paying too much for a property or underestimating the amount of work a renovation project needs, flippers can find themselves short of cash if they don’t plan ahead. As a rule, a flipper should pay no more than 70% of the after-repair value of a property. The real profit is made when you buy the property, not when you sell it.
Not knowing your limitations
Many flippers swear that doing the majority of the work on a property is what makes it profitable, but this only works if you can do a very good job. Part of the skill of flipping is knowing your limitations and budgeting to get the professionals in when needed.