Within a few months, you can buy it for less than market value, remodel it, and then sell it for more. Doesn’t it sound extremely tempting? Is it, however, still possible in 2021?
The Flipping Method
House flipping for profit (also known as “fix and flip,” “property trading,” and “fix to sell”) is a straightforward approach. You come upon a property that needs work and decide to buy it for a reasonable price. Then you remodel the house to make it more appealing to potential purchasers, and you sell it for a greater price.
House flipping is a long-established property investment technique in the United Kingdom (and elsewhere).
It’s an easy math to figure out how much money you’ll gain from this: Profit = Final Selling Price – Purchase Costs – Costs
Here’s an illustration:
- The cost of a property is £200,000.
- £30,000 in renovation expenses
- £20,000 in additional costs
- £300,000 is the asking price for this property.
- £50,000 profit
Using the following formula, you can determine the return on your investment (ROI) based on these numbers: Return on Investment (ROI) = Profit / Total Investment
So, using the numbers from the previous example, we get: 50,000/250,000 = 20% return on investment
Is this a decent investment return? When evaluating their projects, professional property developers utilize a minimum profit on expenses value of 20% as a rule of thumb, thus this example is spot on.
They chose 20% since there are so many things that may go wrong when it comes to property flipping. It’s never simple to accurately estimate the expenses associated with a project. As a result, this number gives you a safety net in case everything goes wrong, and you should still be able to earn a profit.
If you aspire for a ROI of less than 20%, your margin of error reduces, and you have a considerably higher probability of losing money on your flipping project. Experienced flippers do everything they can to keep their costs as low as possible in order to maximize their profits.
House Flipping’s problems in 2020
We are living in historic times. Before you decide to pursue a house flipping plan right now, there are two main considerations you should make. The consequences of Brexit with the coronavirus epidemic.
Although the general election outcome in December 2019 provided some hope for how Brexit would effect the UK housing market, there is still a lot of uncertainty.
Because property flipping is a short-term approach, it’s critical to consider short-term considerations. With the announcement of the Brexit referendum in 2016, the chance to make a lot of money by flipping houses decreased even further.
Since 2004, the flipping technique has been on the decrease since the large profit margins achieved, especially owing to the fast rise in home values, were no longer reproducible.
A successful flip, according to many industry experts, is one that occurs within a calendar year. So, if you buy a home this month, April 2020, and sell it by December 31, 2020, you will have completed a successful flip.
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