How do I start flipping houses in UK?

Nikka Sulton

How do I start flipping houses in UK?

How do I start flipping houses in UK? Flipping a house can be a profitable venture, but it requires more than a quick renovation. Success in house flipping demands a solid grasp of property valuation, housing market dynamics, renovation skills, and a well-crafted plan.

Whether you’re a novice or an experienced investor, this guide will walk you through every step, from property selection to renovation, helping you tackle the challenges and maximize your investment returns. With our top tips and advice, you’ll be well-equipped to navigate the complexities of flipping a house and pave your way to a profitable return on investment.

What is house flipping?

House flipping goes beyond simple buying and selling; it’s all about purchasing low and selling high. Yet, not every property is suitable for quick profits, making it a niche market.

Flipping is centered on fast transactions and swift returns on investment. It’s not about waiting for the market or location to change gradually, leading to long-term profits.

To excel in flipping, you need to spot properties with potential for enhancement, including structural, essential, and cosmetic improvements. It’s not just about addressing issues; it’s about increasing real value through renovations.

Step-by-step guide to flipping a house

Flipping a house can be a profitable venture in the property market, but it comes with risks, especially for newcomers. Whether you’re new to house flipping or looking to refresh your knowledge, here’s a step-by-step guide:

Plan Your Budget: Budget planning is essential for successful house flipping. Follow these steps to manage your costs and achieve your profit goals:

- Determine the purchase price.
- Assess repair costs, including structural, electrical, plumbing, and cosmetic repairs.
- Calculate carrying costs, which encompass utilities, insurance, property taxes, and loans.
- Set the sale price.
- Calculate the expected profit.
- Regularly monitor your budget and make adjustments when necessary.

Research Thoroughly: Before diving into property investment, conducting comprehensive research is essential. Examine properties in your locality and gain a deep understanding of the area. Analyze market trends and property values to pinpoint potential properties and estimate potential returns.
Find the Ideal Property: After conducting thorough research, embark on the search for prospective investment properties. Consult with your estate agent to explore the best available deals and meticulously assess each potential property. Consider your budget constraints and what you can realistically afford. If you require assistance in finding the perfect property, seek guidance from a local PurpleBricks expert.
Negotiate Effectively: Once you’ve pinpointed your ideal property, it’s time to engage in negotiations. Strive to secure the most favorable price for the property. Rely on your estate agent’s expertise to facilitate the negotiation process and provide any additional information you may need.
Secure Financing and Legal Obligations: Flipping houses necessitates a substantial financial investment. Therefore, it’s crucial to arrange the required financing. Consult with banks or lenders to seek out the most favorable interest rates and terms.
Initiate the Renovation Process: Now’s the moment to kickstart the property’s renovation. This could entail a range of tasks, from minor repairs to extensive renovations. Ensure you conduct thorough research and engage with professionals to obtain cost estimates and establish a timeline for the renovations.
Market the property. It’s time to transform your investment into a profit. Advertise the property to potential buyers, whether through a real estate agent or independently. Highlight the renovations you’ve undertaken and emphasize the property’s potential to attract prospective buyers.

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.

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.

Property flipping example

Purchase price	£250,000
General Costs (Refurbishment etc)	£30,000
Buying/selling costs	£15,000
Selling price	£350,000
Profit	£55,000

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.

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.

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.