Is Flipping A Property Right For You?
There are lots of different ways to make money from property. Quite often the one that gets the most publicity though is buying to flip. Heck, there’s dozens of different property shows out there gracing our daytime television sets showcasing this very strategy. But before you dive in, ask yourself these simple questions to find out if flipping a property is right for you.
Question 1) What is your appetite to risk?
When it comes to property, the buy to flip approach is often the riskier strategy. Why? Because there’s more opportunities for things to go wrong when you start the renovation or sale process.
Some homeowners are very good at masking problems when it comes to selling their houses. Sometimes there’s things even a surveyor won’t be able to spot. As you start taking out the old and replacing with the new, that can be when you start to discover these problems. Problems you haven’t budgeted for that are going to cost you both time and money to fix.
Time can also be a big factor when it comes to risk. Unless you’re a cash buyer you’ll need to use some form of short term finance to purchase the property. These often come with 6 or 12 month terms. What happens if you hit an unforeseen circumstance that delays your work? COVID-19 is a perfect example of exactly what could happen. What if you can’t sell straight away at the price you want to hit? Do you have a contingency plan?
If you’re the kind of person who doesn’t like taking risks and loses sleep easily, perhaps buying to flip isn’t for you. If on the other hand you’re not averse to risk and you’re prepared to take the time to make it a calculated risk – you could potentially reap the rewards.
Question 2) How much free time do you have?
There’s a very simple way of saying this. Buying to sell takes up more of your time than buying to let. It just does.
If you’re strapped for time and don’t want to be overly active in property then buying to flip probably isn’t for you. If you want the more passive approach, look at different buy to let options.
Question 3) Are you skilled at DIY or willing to learn?
The renovation process.
Quite often the biggest cost involved in employing skilled tradesmen isn’t the cost of the materials – it’s the cost of the labour. If you’re good with your tools and aren’t shy of getting stuck in – you can save yourself heaps of cash by doing the work yourself.
Bear in mind though, some works will require proper certificates. Say for example if you re-wired your own house, you would need to get a certified electrician in to come and connect, test and sign off your work.
Also think about cost of tools, the first place I did up (although it was my home at the time), I spent a small fortune on buying myself the right tools for the job. If you haven’t got some decent kit in your garage, budget for it.
Question 4) What are your financial goals?
Buying to flip is quite a “lumpy” way of making money. What I mean by that is pay day’s are inconsistent and spread out so you only get paid once you’ve completed on a property. But, if you get it right the pay-offs can be quite hefty and are a good way of building capital quickly.
If you are after more of a stable and consistent way of making money through property, buy to let is the best way to go where as long as you’re tenanted and encounter no issues, you should get your monthly rental payments.