EP:72 Flipping Property and Making Money is 100% Repeatable - If You Don’t Make These Mistakes
Join Paul in an all new episode, as he shares how to repeatedly make money doing flips!
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The Show Transcript:
Hi and welcome to the property side hustle podcast
Today, we're taking a long overdue look at the exciting world of property flipping – turning tired, neglected houses into stunning homes and substantial profits.
In today’s episode you’re going to learn the ins and outs of this fast-paced strategy, from finding the right deal to managing a refurb and then finally selling and handing over the keys to a happy buyer and banking those profits.
Property flipping, at its very core, is about buying a property below market value, renovating it quickly and efficiently, and then selling it for a profit.
It's not just about slapping on a coat of paint; it's a strategic process that requires careful planning, market knowledge, and a touch of creativity here and there. So, let's break down the key steps to flipping success.
First up we have step 1: The Hunt – Finding Your First Property Flip
The first, and arguably most crucial, step is finding the right property. You're looking for a diamond in the rough – a property with potential, but one that's currently undervalued. Think about properties in need of cosmetic updates, outdated kitchens and bathrooms, or even minor structural repairs. These are the types of properties where you can add significant value.
Remember the whole point is you have to see a property you can add value and force that appreciation in price by way of a refurb.
Where do you find these hidden gems? Auctions are a great place to start, offering the potential for below-market-value purchases. Keep an eye out for probate sales, where properties are sold quickly due to inheritance. Networking with estate agents and attending property meetups can also give you access to pre-market deals.
Repossession listings can be a great source of deals, and you can access a list of repossessed property on a website called repolist.co.uk (you do have to pay, but it’s worth it if you’re looking to buy a potential flip) and also don’t forget your good old online property portals like Rightmove and Zoopla are also valuable resources. Remember, speed is often key in this market, so be prepared to act quickly when you find a promising lead as you might be up against other investors also looking at their next flip.
Step 2: The Numbers Game – Crunching the Costs
Host: Before you even think about making an offer, you need to crunch the numbers. This is where many aspiring flippers fall down. Don't just focus on the potential sale price; meticulously calculate all your costs. This includes the purchase price, of course, but also legal fees, stamp duty, renovation costs (be realistic!), also any holding costs (like mortgage payments and council tax during the renovation), and your selling costs (estate agent fees, etc.).
Get multiple quotes from contractors for the renovation work. Don't just go for the cheapest option; prioritise quality and reliability. Factor in a contingency fund for unexpected expenses – because, in flipping, there are always unexpected expenses! And finally, be realistic about your profit margin. Don't get greedy. A healthy profit is good, but overpricing can lead to a property sitting on the market for too long, eating into your profits.
There’s market value and then there’s priced to sell. So, think about those holding costs if you’re going to take 6 months to sell the damn thing.
You’d be surprised how many people forget this end of the flipping process.
Step 3: The Renovation – Transforming the Space
You've secured the property, the numbers stack up, and now it's time to get your hands dirty – or, more likely, oversee the contractors. This is where your project management skills come into play. Create a detailed renovation plan, set a timeline, and stick to it as closely as possible.
This is called a schedule of works – this details, what happens and when and in what order things will happen. It helps keep things moving along smoothly.
Focus on the areas that will have the biggest impact on the sale price. Kitchen and bathrooms are usually a good investment. (But you can easily over-spend here too, so does the kitchen need a complete over-haul, or can you use the units and just replace the doors and worktops? Doing this can drastically cut your costs by over half.
Also look at kitchens and bathrooms on resale sites like Facebook marketplace as you may pick up an absolute bargain for an almost new kitchen or bathroom.
Consider updating the flooring through-out but try stay away from that awful grey carpet. I remember years ago many landlords and investors would paint all the walls magnolia and the carpets would be a rough weave of magnolia too.
Nowadays the colour is grey! Want to stand out when you sell, don’t make it look like there’s 50 shades of grey in your property, it’s drab and it screams basic and cheap.
Consider repainting and improving the curb appeal. Don't forget the small details – things like new door handles, light fixtures, and landscaping can make a big difference.
Talking of the garden most people overlook the outside spaces and just make it presentable and that’s it. Getting a premium price means putting in some creative effort and most gardens are bog standard so if yours has some nice features then it will stand out a mile when marketed for sale. A nice garden can get viewings alone!
Keep the style modern and neutral to appeal to a wider range of buyers. And, of course, ensure all work is compliant with building regulations.
If there has been any major construction work, like knocking down walls, building of extensions, new heating systems, new electrics etc then you’ll likely need to ensure it all meets building regs standards and this will need to be certified before any sale takes place. So, get your ducks in a row and make sure you have this taken care off before advertising the property.
Step 4: The Marketing – Showcasing Your Masterpiece
The renovation is complete, and your property looks amazing. Now it's time to shout about it! Professional photography is essential. High-quality photos will showcase your property in its best light and attract more potential buyers. Make sure the agent is aware of any stand-out features and have them write their best ever property description highlighting the key features and benefits.
You might also consider using a property staging company at least for the photos. An empty property never photographs well. It’s hard for potential buyers to picture which room is what and how they would live in the property. New builds have show homes for a reason, they sell the dream and have people signing up left right and centre because they fall in love with the décor and design of the furniture…
Want a premium price? Consider staging your property there are many companies now who offer this for very reasonable rates.
You've received an offer – congratulations! Negotiate wisely but be prepared to compromise. Remember, you're in the business of flipping, so holding out for the absolute top price might not always be the best strategy. Once you've accepted an offer, work closely with your solicitor to ensure a smooth and efficient transaction. Delays with solicitors are often just one solicitor waiting for information from the other solicitor, so make sure that nobody is waiting around for you to provide information.
And that's it! You've successfully flipped a property. Now you can take your profits and move on to your next project. Remember, property flipping is a business. It requires hard work, dedication, and a keen eye for opportunity. But with the right approach, it can be incredibly rewarding, both financially and personally but what’s my takeaway from the strategy…
Next up I’ll share my thoughts but first...
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In today’s episode I have shared the basic process of property flips in the UK but what are my key takeaways I can share with you…
What I know is success is 100% repeatable with flips if you follow a set-path and you don’t make these very common mistakes.
Rule Number 1: People often get their numbers wrong.
They pay too much for the property, they under-estimate the cost of the works, and they over-estimate what they can sell the property for.
This is super common and any one of these could completely wipe out any profits you may have had.
It’s vital your numbers are sensible without being over cautious.
Rule Number 2: We Get Emotionally Involved
By this I mean I see time and time again that people, over develop and spend too much money. You’re looking to improve a property not create the best 3 bed property on the planet. It’s super common to see people putting in expensive kitchens and bathrooms with integrated appliances and top of the range gadgets.
Yes, it’s going to look amazing, but will you get that money back in the sales price? Probably not. My advice is to stick to a budget and to decide on the level of spec beforehand.
You cannot go basing your investment on a spreadsheet before you buy and then during the refurb your spending extra cash left right and centre creating some dream home.
By all means create a good end product but you need to not over-develop by getting emotionally involved. You’re not going to live in the property. Its going to be sold, concentrate on the numbers at all times.
Rule Number 3: Lack of Contingency
OK so many people work out the assumed cost of the works and forget they need a contingency, or they have a very small contingency that is just not realistic. In my experience there will always be things that cost more than you expected. There are sometimes issues you uncover that you had no idea existed and now they need to be fixed. These things again can de-rail what was a great deal.
My advice is make sure you have a 10% contingency on basic refurbs. If the refurb is back to brick and you know you have potential issues with damp, roofs electrics, structure then you need a 15% contingency on top of the assumed cost of works.
That way you have what I call wriggle room, and it won’t hurt your bottom line too much if at all.
If you can avoid these mistakes, then property flipping is a fab way of generating an amazing cash-flowing property business.
No tenants, no headaches with managing agents, no worries about non-payment of rent and a process that if followed in the right manner will repeatably give you success after success and put money in your bank.
Now I speak with lots of people, and many are wanting to avoid tenant issues and looking at flips, so I hope you enjoyed this episode and it gave you food for thought… Remember if your looking for my help on your property journey then apply for property basecamp today over at psnpropertyblog.com or check the show notes for the links.
That’s it for today’s episode please like and follow our podcast for more property insights, next time I’m going to be talking about another creative strategy so make sure you tune in for that one…
Till next time, stay safe, and take it easy
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