Property investment has always been one of the most effective means of earning money/making profits. At its core, there are two property investment strategies. The first one is buying a property and selling it for a profit while the other one is buying a property and renting it out. In this post, we’re going to discuss the first one, which is commonly known as flipping property strategy.
Also known as “Buy-to-Sell”, flipping property involves three simple steps: buying a property, doing refurbishments, and selling it at a profit. Essentially, the key objective of this strategy is to make money quickly.
If you can implement this short-term strategy successfully, it’s possible to make a significant profit just from one deal that you can use to fund other income-producing assets. With this, you don’t need to worry about rental income or dealing with tenants. All you need to do is sell the property for maximum profit.
Let’s consider an example to understand the way flipping property lets you make money. Assume, you purchased a property for £75,000. Your total costs including refurbishment, contingency, legal fees, borrowing costs and estate agent come to £25,000. So, your total investment for it is £75,000 + £25,000 = £100,000. Finally, you sell the property for £120,000. So, your net profit comes out as (sell price minus your total investment) £20,000.
Naturally, it acts as a great way to earn profit to use as deposits to build a property portfolio as here, you can make a hefty amount of profit quickly that can be used to flip another property.
Key things you need to consider when applying flipping property strategy
Though it’s an attractive yet short-term strategy, whether or not you could find success by flipping a property depends on a couple of essential factors. Let’s take a look.
- Type of property: Since the objective of flipping property is to sell a property quickly and for a profit, the type of the property plays a crucial role in helping you attain success. Put simply, the property must come with the potential to attract a wider demographic so you don’t have any shortage of prospective buyers. Typically, a two or three-bedroom house appeals to a diverse range of buyers than a trendy ninth-floor apartment or a small flat does. When deciding on the property type, it’s important to focus on the ones that you can add value too.
- Property location: This is another major factor that heavily impacts how much profit you can make by flipping a property. You may have purchased an undervalued property and upgraded it significantly through refurbishment but if the location isn’t easily accessible by public transportation or it’s a problematic area, you’ll likely find it difficult to sell and make profit. Therefore, you need to choose a property in a desirable location so you can facilitate a quick sale that brings a considerable profit your way.
To make the most out of the flipping property, you need to find a property that lets you maintain a balance between your total investment and the selling price. You should understand that while this strategy lets you make profits quickly, there are risk elements as well. So, follow the above tips, consider all associated financial and time factors, and be prepared for unpredictable changes in the market. When these aspects are taken care of properly, flipping property can become an effective strategy to earn profits in real estate.