What is it?

This is when someone buys a house, usually that requires renovation or updating and is then sold immediately after the work is complete for a profit.

 

How do you do it?

In simple terms, you buy a house (preferably at a discount to the current market value), add value to it (using various methods) and then sell. You profit from the difference between the total money you have invested and the price you sell the property for.

 

Buying a house at discount

This is the difficult bit and purchasing a property for the wrong price can be costly. Some people attend property auctions, as it is what they see on the television and they believe that all properties sold here are inexpensive. This can be true but is often not the case due to many other pitfalls.

The easiest way to do this is to use the services of a property sourcing company. These companies use targeted marketing campaigns that are direct to homeowners and are able to acquire homes at a substantial discount. The sourcing company should have a good relationship with their local estate agents which may allow them access to properties before they come on the market and again, at discount and avoiding a bidding war.

Regardless of where or how you purchase the property, it is of paramount importance that you are certain on the value and that you are not buying with emotion. Buy with your head and not your heart as this is NOT your home but an investment. Get this bit right and the rest should fall into place.

 

Adding value

Before completing your purchase you should know how much money you are willing to spend on renovations. You then can decide whether or not your budget will stretch for this particular project. If it doesn’t stretch then move on, as there is nothing worse than starting a job and having to sell it halfway through as you have run out of money. Bringing a builder along with you to the viewing is always recommended. Again, another benefit to a sourcing company is that they have this expertise. They will know what is required and should have a good builder on their books to advise.

 

Like purchasing the property, get this estimate wrong and you will eat into your profit.

 

You can add value by simply adding a new kitchen or bathroom, painting the property, laying new carpets and flooring.

 

Additionally, a brilliant way to add value is to add bedrooms or bathrooms in the right circumstances.

 

It is important to have an idea of what ceiling price the property will have. By that, I mean that no matter how much you spend, the property will have a maximum that it will sell for. There is no point in spending £40k on a kitchen for a £100k house. You simply won’t get this money back.

 

Whatever your thoughts on renovations are, just be sure that you have a good estimate and a bit of contingency to deal with unforeseen problems.

 

Selling the property

This should be the fun bit, the part where you get the profit you have worked so hard for. Good practice is to speak with the estate agent as soon as you purchase and explain your vision for the property and try to have a buyer lined up prior to having the renovations completed. This way, you have the property sold immediately saving you money on mortgage payments, should you have one.

 

Make sure that your property is finished to a high standard and be certain that it is correctly priced. You want it sold and not sitting on the market for months, all because it is priced too high. Have your criteria set out and decide on what profit you want from the sale and make it work. Do not get greedy as this could invariably cost you money.

 

Do the deal and move on to your next exciting property project.

 

Once again, a good sourcing company should have existing relationships with estate agents that would make this process smoother.

 

Obviously there are other factors at play which will be unique to each individual such as tax matters. An accountant can advise on these matters to make sure you are making the most out of your investments.

 

If you are interested in flipping property or building a property portfolio please get in touch with us at NI PROPERTY GIRL and we will be sure to help you on your way.