House flipping, the practice of buying and rapidly selling property for profit, has witnessed a significant decline in popularity, mainly due to a slowdown in house price inflation. According to research conducted by estate agent Hamptons International, the peak of house flipping occurred in 2004 when 60,340 homes were flipped in England and Wales. However, by 2018, this number had dropped significantly to 18,630, marking a substantial 69% decrease in house flipping activity. In terms of the proportion of all homes sold, 4.8% were flipped in 2004, but this had reduced to just 2.1% by 2018.

The phenomenon of house flipping was most prominent during a period of robust growth in house prices. Between 2000 and 2007, house prices surged by an average of 13%. This period of substantial price appreciation contributed to the widespread popularity of house flipping. However, the dynamics of the property market changed after the financial crisis in 2008 and the uncertainty surrounding the Brexit vote in 2016. In 2019, UK house prices recorded a modest average increase of just 1.4%, with some regions even experiencing price declines. Consequently, the practice of flipping property has become considerably riskier compared to its heyday.

So what is property flipping?

Flipping houses is more than just buying and selling; it’s about purchasing low and selling high. However, not every property fits the bill for quick profits, making it a niche market.

Flipping revolves around speedy transactions and rapid returns on investment. It’s not about waiting for the market or location to change over time, which can bring long-term profits.

To succeed in flipping, you must identify properties with potential for improvement, including structural, integral, and cosmetic upgrades. It’s not just about resolving issues; it’s about adding tangible value through refurbishment.

Why would I want to flip property?

Property flipping can be a lucrative venture, whether it’s a side gig or a full-time career move. It involves renovating a property and selling it for a profit.

You might approach it as a one-time project, using savings or an inheritance to buy a bargain property and earn a return on your investment by selling it at a higher price after renovations.

Sometimes, personal circumstances align with property flipping. For instance, if you anticipate living in an area for a short period, you could buy a rundown property, live in it during renovations, and sell it when you move on.

How to make money property flipping

To turn a profit in the property market, especially with current modest price increases, renovating is key. You’ll need to buy below market value – think repossessions or auction bargains. Estate agents may also have properties for quick sale due to divorce or repossession, potentially at a lower cost.

Keep in mind the substantial fees involved. Stamp duty applies for properties over £125,000, with an extra 3% if you already own a property. Expect additional expenses like legal and survey fees, plus at least 1% plus VAT in estate agents’ fees when selling.

If you lack upfront cash, consider financing costs and ongoing expenses like council tax, utilities, and insurance, which can add around £20,000 to renovation costs, impacting your profit margin.

Property flipping example

How to finance property flipping

If you’re not planning to live in the property or rent it out, traditional residential or buy-to-let mortgages won’t apply. These mortgages are for longer-term and habitable properties, not quick flips. 

For property flipping, consider short-term financing like a bridging loan or buy-to-sell mortgage. It’s faster to arrange but comes with higher interest rates. You’ll still need a 20% deposit and loan fees, which can be covered by savings or home equity. You can choose to make monthly interest payments or include it in the loan, paid when you sell the property.

How to choose the property

Selecting the right property at the correct price is crucial for profitability. Look for properties with potential for improvement, but be cautious of major issues that can be expensive to fix. A building survey is a prudent step.

Examine local house price data, but remember that trends can vary within regions and cities. Consult estate agents for localized insights on areas likely to appreciate in value and what buyers seek.

Research areas undergoing investment, as they may be on the rise. Utilize resources like Zoopla for property value estimates and details like bedrooms and bathrooms. In many cases, a two- or three-bedroom house holds broader appeal and potential for value appreciation than a flat.

Consider proximity to transportation, amenities, crime rates, and nearby schools, especially if targeting families. Prioritize buyers seeking move-in-ready homes over investors looking for bargains.

What kind of property is suitable for flipping?

When flipping a property, selling quickly and profitably is key. Opt for properties with broad appeal, avoiding niche options like small flats or trendy lofts. Look for homes that can attract a wide demographic, potentially sparking bidding wars.

Consider three or four-bedroom semi-detached houses, appealing to families or young couples looking to move up the property ladder. Such properties often have the potential for rapid value appreciation.

Larger houses can deteriorate and improve quickly, resulting in more significant price swings. Smaller properties offer less dramatic but potentially less risky returns, suiting those new to flipping.

Factor in all costs in flipping properties: 

When calculating potential profits, consider all costs involved, as they can significantly impact your returns. Beyond refurbishment expenses, these additional costs include:

• Legal fees
• Estate agent fees
• Broker fees for finance
• Stamp duty
• Survey fees (especially detailed surveys for extensive renovations)
• Holding costs (insurance, utilities, council tax, etc.)
• Tax (corporation tax for property flips through a limited company)

Let’s revisit the example:

• Purchase cost: £150,000
• Refurbishment costs: £20,000
• Buying/selling costs: £15,000
• Selling price: £200,000
• Profit: £15,000

This project remains viable, but you can see how margins can change quickly. Delayed sales can increase holding costs and potentially lead to lower offers, impacting profit.

For financing, experienced developers might use cash and a bridging loan, as traditional mortgages are unsuitable due to their long-term nature and lengthy processing times. Bridging loans, while carrying higher interest rates, are ideal for flipping because of their short-term nature. Typically, you’d borrow a portion of the money (around 65-75%) and fund the rest with cash.

More Property Blogs HERE: 

How to Reduce Tax on Rental Income

Challenges of Owning A Second Home

What insurance is needed for a buy-to-let property?

What is the difference between remortgage and refinance UK?

Buy Refurb Refinance Rent (BRRR) Explained

Section 24 Tax Guide for Airbnb Hosts

Download NOW 

4 Simple Steps To Becoming Wealthy Through Property

DOWNLOAD