flipping on the rise, despite pandemic
The number of homes in England and Wales which have been bought, refurbished and sold on again within a short period of time has hit a 12-year high. Despite the pandemic, which forced the property market to close its doors for several weeks earlier this year, one in every 40 homes sold was bought and sold within 12 months, according to research from Hamptons International.
The mini boom in house prices has not just pushed up values of turnkey properties ready to move in. With the average difference between the purchase and sale price of flipped properties at the highest level since records began in 2007 – now standing at nearly £41,000 – investors are sensing an opportunity too good to be missed. These profits have been boosted as investors have switched from flats to houses, encouraged by the lockdown experience of wanting more space – both inside and out.
work out your target market
When it comes to any refurbishment or ‘flip’, it is important to identify your target market and ensure the property appeals to this, rather than your personal taste. So many would-be investors get emotional about their investment purchase and forget that they’re trying to make a profit. They spend too much on the refurb, are too unique in their choice of refurbishment and try to be too different. It’s worth considering:
- If you are targeting young professionals, make sure bedrooms are similar sizes so no-one is left with a tiny room while sharing.
- Consider local amenities, such as access to public transport, shopping, cafes etc.
- If it’s a family home, make sure there is space for a children’s playroom or at least a play area and try to squeeze in two bathrooms, or at least a big main bathroom. Don’t overspend on expensive wood flooring or carpets, with kids running around, scratching the floor, dropping food and drink etc . Make sure you are near local schools and parks, within easy walking distance.
- If you are buying in a block of flats, try to find one with a lift if you’re looking at a higher floor. You reduce your market dramatically if you go high with no easy access.
know your budget
Key to the success of any project is to know your costs and possible resale value. Studying the local market and looking at the base line as to what similar properties sell for, is a good place to start. There is no point focussing on the highest value a property has achieved in the market because so many factors could have gone into that sale, including market conditions, a specific buyer and how long it was on the market for. Look at your purchase price, cost of finance, cost of refurbishment plus contingency, cost of sale, and how long you expect to be on the market for.
There is never a bad market to buy an investment but it always comes down to costings. Don’t buy for the sake of buying, simply because flipping is so popular at the moment. It’s like going in on a poker hand due to boredom, while holding no winning cards. Patience is key.
One note about costs: skilled labour is important. There is nothing worse than trying to save money and cut costs by doing it yourself. If you do, it is usually noticeable when you try to sell, and you could end up waiting longer to find a buyer, or having to reduce the price.
financing your project
Accessing BTL mortgages from high street banks can be difficult, as banks are not likely to lend on uninhabitable properties or they are unable to provide funds within the required time-frame. Bridging finance has been able to fill this void, gifting investors the ability to buy properties quickly and make the necessary renovations.
A bridging loan lender can make decisions within hours of initial enquiry and funds can be released in some instances in a week, preventing investors from either missing out on opportunities or leaving properties sitting in portfolios without generating returns while they wait for financing from long-term lenders.
Our bridging loan products are suited to meet the diverse needs of property investors planning to flip a property. Borrowers can apply as individuals, sole traders or through limited companies. We do not require a minimum credit score, accounts, or proof of income, and do not require personal guarantees on company transactions. This allows us to take a practical, common-sense approach to lending.
If you are looking to refurbish a property before selling it on at a higher value, please get in touch to find out how MT Finance can help on 0203 051 2331 or fill in our contact form, and someone will be in touch with you shortly.