Flipping, or buy to sell, buy, refurb sell, or option to purchase to sell, can make you a years income in one deal.
Or leave you so financially and emotionally burned you’ll be begging your old boss for your old job back that you asked him to put in his pipe and smoke.
Here’s the right, and realistic way in 7 easy Tips:
Tip 1. 20% return on value
You should be looking at a 20% return [on the value, not necessarily your cash]. Anything above 30% is possibly a bit unrealistic or ‘best case’ [best case assumptions in flips are dangerous – see below].
On a £30K gross profit you should come out with £15K to £20K Net, depending on the quality of the refurb.
Tip 2. London or rest of UK
You’re going to be either side of £100K on a 3 bed terrace outside London. Stay under 1st stamp duty threshold. Buy at £90K sell at £120K is do-able – good in fact. London figures are better usually, and will sell quicker, but costs and risks are higher.
Tip 3. Be pessimistic
Seriously. you know we’re a ‘glass half full’ kind of community, but it is vital to be pessimistic with the figures, likely sale prices, costs, repayments, and e s p e c i a l l y timeframes. It will take longer and cost more if you don’t think it will.
We have a deal analyser that analyses 3 scenarios – ‘best case,’ ‘likely case,’ and ‘worst case,’ [My business partner is infamously paranoid].
You really need to ensure you come out with a m i n i m u m 5% of value return on w o r s t case to even be interested.
Tip 4. The Rule of 3
For every 3 flips you do, 1 will be ‘best case,’ 1 ‘likely case,’ and 1 worse or slightly worse than ‘worst case.’ Most people fail because they have happy ears and expect every deal to be best case.
So on a £100K property, if best case is £30K [it’ll end up being £20K], likely case £15K [end up £10K] and worst case £5K [end up zero], then you’ll end up with around £35K on every 3 flips – or an average of just below likely case [£12K each flip average].
That’s actually pretty good on 3 £100K flips, but most people don’t get realistic to start with – you can’t blame them as they don’t know what they don’t know.
So after the first one [which is often the worst case as there is not enough knowledge or experience], they give up. Keep going, you’re best deals are yet to come as your experience will only get better.
And interestingly, your best flip will be the worst case because you’ll learn the most in the shortest possible time with the most pain experienced [which makes it real].
Tip 5. Refurb to S e l l
Don’t cut corners or ‘refurb to rent.’ Someone wants to live in and love this ‘home.’ Find out what the typical buyer wants. (First Time Buyers funded by the Bank of Mum & Dad are often the best market). Pay attention to the details. Ask the Agent for feedback
Tip 6. Reward
Why would the Agent sell your property before anyone else’s? Why would they list it in the paper, or push vendors your way? If you chip them on fees, they won’t. Pay overboard on their fees. Give don’t negotiate. Ethically reward for ‘special treatment.’ You’re their favourite, or someone else is.
Tip 7. Good Deals
Good Deals find the Money Whether its your cash, the banks’ or a JV partners, an option or a commercial facility, a ‘lack’ of money should never stop you. A good deal finds finance. The better the deal the lower the risk.
And remember every area is different – some work very well for flips, and others not to – and it’s important to know the difference
Rob Moore & Mark Homer
Co-Founders of the Progressive Companies
Full Time Property Investors
Double Best Selling Property Authors
Over 350 Properties Bought & Sold