Is Flipping Houses a Worthwhile Venture for Investors?
Property investment is not to be taken lightly; the market can be so turbulent that you can win big, but you can also lose fast. Sometimes, to reap the reward you need to ride the storm and absorb any bad patches whilst you wait for the good times to return. Other times though, you need to act fast and work with the short term in mind as it could provide you with better results.
This is where flipping houses becomes an art form but in 2024 is it still a worthwhile venture for investors?
Well, a recent showed that profits on a property flip were reaching as high as £42,800 on average. It certainly sounds inviting but this was at the back end of a global pandemic where house prices had risen quite considerably, and the stamp duty holiday was in place. Fast forward to 2024 and predictions indicate that we will see house prices drop this year, between 2% and 4% according to Lloyds Banking Group. is to be taken with a pinch of salt though as other predictions claim that prices could rise this year but only by single figures. It is both this minimal increase and projected large drop that has seen a rather tentative approach to flipping in 2024.
What does flipping houses mean?
You may have heard of flipping houses but not be sure of what it means or how you do it. In its simplest definition, a house flip is where you buy a property at a low price and then sell it for a profit within a short period. Think of it as a buy low sell high project.
There are two types of property flipping though and if you are still considering investing in property for a quick profit, you may want to investigate the options open to you.
Assessing market trends flip
In this instance, you would find a market where prices have been appreciating quickly, snap up a property and then sell it fast to return a profit. With no investment going into the upkeep of the property, this is seen as using the market to your advantage rather than using the property.
Renovation project flip
In some cases, someone looking to flip a property will have a good knowledge of trends, renovation ideas and cosmetic changes that can improve the property. They will use this knowledge to enhance the house that they bought cheaply, improve it and then sell it fast.
How quickly can a property be flipped?
Depending on whether you want to do work to the house to help increase its value or just secure a property at a cheap price and sell it fast, the timescale will vary. In the UK, there is currently no law on how long you must own a property before it can be sold but should you have used a mortgage to help finance the purchase, you would normally have to wait 6 months before you can sell the property.
The reasons for this 6 month time frame stem from the fact most mortgage lenders do not provide new mortgages for properties that are shown on land registry records to have been with the current owner for 6 months or less. Some lenders will also take into account the possibility of money laundering so will steer clear of supporting a mortgage application.
However, some lenders will offer concessions to this 6-month period. If for example, you were buying the property for flipping purposes, a conversation with the lender before getting a mortgage agreement could see them open to the idea. You can also benefit by selling to a cash house buyer, with no need for a mortgage, the 6-month rule can be completely avoided.
How can you flip a property and make a profit?
Even though the buy low sell high method is appealing to many, it isn’t quite as simple as that. After all, if you buy at the wrong time, you could find that you have paid more for the house than you are likely to receive when you sell it. Instead, you need to be tactical and flipping a house should only be considered when you have carried out the right research.
House flipping is a profitable investment but as with any financial project, the result can waver. What could be looking good one day can quickly turn bad the next.
Buy below market value where possible
Perhaps the most obvious tip is to buy low so that you can sell high. If you buy below market value and can sell at or above market value, you are already onto a decent profit.
Factor in any costs of selling
In most cases, there are fees associated with selling a property and these can severely dent any profit. This should be looked at before committing to the sale. You could end up with a much smaller profit all through choosing the estate agent. There are cash house buyers like Gaffsy that will sell your house for free meaning there are no fees, commissions, or legal costs. So, any profit from your flipped property is yours.
Factor in costs of buying
Before you can turn a profit on your property, you will need to have one to sell and buying any property can come with a variety of costs. Assess these first as they could see you spending more than first budgeted. In a house flipping project, one of the biggest outgoing, apart from the property itself is the refurb work required. If you bought a property that was in dire need of development before being able to sell, you will almost definitely need to budget well. Checkatrade recently investigated the average costs and in refurbs alone, you could be looking to spend anything from £38,000-£74,000.
Follow the market
Property markets can be volatile, and prices can rise and fall quickly. As you will be aiming to sell fast, you should monitor the trends. Only consider short-term trends rather than long ones. The House Prices Index (HPI) will show you the lay of the land for your area and give you a good idea of whether the property is worth holding on to or selling.
Time is of the essence
House flipping should always be completed quickly and Gaffsy can sell your house fast, in as little as 7 days if required. This means you can achieve the house flipping goals within the timeframe that matches your needs. A fast house sale reduces your own costs of financing the project as well as reducing the risk of you being caught out by a depreciating market.
What are the risks of flipping a property?
With any financial investment, there are risks and with property investment, there can be many. Before committing to the idea of flipping property you need to weigh them all up.
- It is a lot of money to invest and it may not deliver a profit-can you afford to lose that money?
- The stress of the process can be a lot to handle, especially if you end up losing money.
- The renovation costs could escalate to a lot more than you had budgeted for
- Problems could develop within the property or renovation that require further investment and you may not have the funds.
- The property market may be in a decline and find you lacking in potential buyers
Should I flip a house in 2024?
With the varying market predictions now could be a time to buy at a cheaper price than before, however, if those other industry predictions ring true, we could see prices dip much further. This could mean that 2024 would be your year to sell when prices are expected to start rising again towards 2025.
If you cannot wait until 2024 or beyond and have a property to flip, Gaffsy can help. Being one of the leading cash house buyers in the UK we know just how difficult negotiating your way through a property sale can be. We make it stress, worry and hassle-free thanks to our no fees and quick sale methods. Simply get in touch today so we can get it sold.
