Flipping is the practice of buying a property and then selling it almost immediately afterwards. It’s all that many investors are interested in – as it allows them to focus, single-mindedly, on bargain-hunting. If you lack the skills, resources or inclination to develop a property over a long period, then rapid-fire flipping may prove alluring.
This isn’t to say, however, that flipping property is easy. It demands distinct skills and resources. You’ll need, for example, an exhaustive knowledge of the market that can be drawn upon in an instant. This will ensure that you’re able to make informed decisions about what’s a good investment and what isn’t at the proverbial drop of a hat.
You’ll be able to use a combination of strategies to get the best from a flip. Let’s look at a few of them.
Buy, Refurbish, and Sell
This method is the most straightforward of all flipping methods. You buy a property, you refurbish the interior to make it more saleable, and then you sell it. This refurbishment can be as major or minor as the property demands. In most cases you’ll want to look for properties which don’t need much work – that way you’ll be able to quickly flip it and move onto the next one.
Buy, Keep Part, and Sell
You might decide that you’d like to split your investment into several smaller parts, selling it in chunks. You might, for example, sell one floor of the property and then retain ownership of another so that you can rent it out.
If there aren’t any physical barriers in place between the parts of the property you’d like to sell and those which you wouldn’t, then you’ll need to erect them. This will not only involve brick-and-mortar work; it’ll also carry a great deal of administrative and legal hoop-jumping. In some cases, this work can be worthwhile – but keeping part of the property is easier when such work has already been done.
Buy at One Auction, Sell at Another
This method barely demands that you even look at the property itself, much less visit it. Simply buy a property for a low price at one auction, and then move to another and sell it for a high price. In some cases, you won’t even need to move to another auction – just participate in repeated lots in the same place. You’ll thereby be able to make thousands of pounds in a matter of mere hours. What could be easier?
Of course, this isn’t quite true. You’ll need to have spent countless hours building up your knowledge of the market, and honing your auction-house instincts to razor-sharpness, before you can get consistent joy from this approach. Competition from other investors will often push up prices, and so you’ll need to constantly build your knowledge to stay ahead of the pack.
A property auction represents a fantastic opportunity to secure oneself a bargain – but it’s also inherently risky. If a flurry of bids take place for a given property, it’s easy to be intimidated and drop out, or to overestimate its value and end up paying over the odds. If you know what you’re doing, however, and you’re able to keep a cool head while everyone else is losing theirs, you’ll be able to thrive in this environment.
Buy, Split the Title, and Sell Off In Many Parts
If you’re got a block of flats, or some similarly large building, then you might find it difficult to sell them all at once. After all, larger properties can appeal only to investors with especially deep pockets, and thus demand will be limited and the price will be forced downward.
If you’re able to legally divide your property up into many different parts, however, then you’ll suddenly have access to a far larger market. This can often push the price up by 20-30%, and sometimes even more depending on how large the entire property is. This increase might comfortably cover the cost of estate agents and legal fees.
Be on the lookout, then, for larger, undervalued properties that can be divvied up and sold in parts. If you’ve got enough capital available, then you’ll be able to safely make this sizeable investment, and then secure a return that’ll almost always be far larger.
Buy, Split or Change the Use Class, and Sell
Another option is to change the ‘use class’ of the property. The Town and Country Planning Order 2016 demands that property be legally classified according to the purpose it’s going to be used for. A ‘use class’ of A1, for example, covers shops, retail warehouses, pet shops, undertakers, and other similar businesses. A3 is reserved for premises where food will be consumed, while A5 is for take-aways. Part C use classes are the residential sort: C1 for hotels, C2 for residential institutions, C3 for a family home.
Getting the use class changed incurs an administrative cost. But, as with the other options we’ve mentioned, this cost can often be worthwhile, as the ‘use class’ of a property often influences its value. It might thus be worth securing the necessary planning permissions and changing the use class on your purchase before selling on. For example, if you think a former care-home or hospital might be repurposed as an apartment block, then changing the use class might significantly boost its value. This is the sort of minor tweak which doesn’t take much thought or effort, but which can provide flippers with a marked cash boost.
Recently, certain use classes within the TCPO 2016 are allowed to change to other use classes under Permitted Development Right. There is a formal procedure to be undertaken for this, but it does allow a new use to be established without running the risk of the Local Planning Authority objecting to your proposal. Find out more about permitted developments rights here.
In Conclusion…
Flipping is a skill that, once developed, can provide an investor with a consistent stream of profit. You’ll be buying and selling quickly, making small amounts on each transaction, and so success often hinges on gut feelings, and well-honed market instincts.
If you’d like to learn more about property investment, then be sure to check out this free guide to building your wealth through property, courtesy of Andy Churchill – a chartered surveyor with more than two decades of industry experience to draw upon.