Tips for landlords wanting to flip properties!
A specialist investment lender has set out tips for how landlords can succeed at flipping - purchasing homes and selling relatively quickly.
The concept had fallen out of favour until recently, but the rapidly rising house prices of the past 15 months suggests it’s become popular again.
Scott Hendry, auction finance director at specialist lender Together, has offered tips for others considering getting stuck into the world of property flipping this year onwards.
- Location, location, location: Choosing a location that is familiar could be beneficial, as you may possess more knowledge of growth potential of the area. If it is an ‘up and coming’ place, it will all play on the return of your investment.
- Stick to your budget to the penny: Overspending can be a slippery slope, so sticking to the agreed budget is crucial. There also may be unexpected issues down the line which may need urgent fixing, which could make the investment simply unaffordable. Recently there’s also been some concern over shortages in construction materials, as prices of concrete, aluminium, steel and timber continues to rise1. Regardless of how much of the property you decide to renovate, it’s important you have a safety net in case these delays lead to surcharges and need for repairs down the line.
- Research: There are a lot of resources that can help you along the way. For example, the Legal Pack contains documents relating to the property and is prepared by the seller’s conveyancer. Each copy is unique, so despite your experience, reading will facilitate your journey. Small prints are as important, if not more, as these are often the bits with surprises – such as covenants, restrictions and rights of access.
- Know strengths and weaknesses: When it comes to the process of buying and renovating a house, knowing your strengths and weaknesses can ensure that everything is completed at an optimum speed without the hefty price tag. A downfall is often, not overspending, but being over optimistic on work that you have time and skill for. This often leads to slowing down projects or even spending more due to mistakes. Ask your family and friends, they may be handier than you think when it comes to DIY tasks.
- Flipping the unusual? Hendry says: “We’ve seen all sorts of properties appear in the catalogue over this time and have an open mind about the circumstances when we’re happy to lend – whether it’s an unusual property, is in a state of disrepair or you’ve got a very tight deadline. Here’s where a securing a bridging loan against the property for up to 12 months might be useful. This would allow you to complete the work they need to do and exit the short-term loan by selling the property – with investors expecting returns of up to 20 per cent on the most successful renovations.”