Is house flipping a safe option?

[George79]

I hope this is the right area. A lot of people ask this question but never get a solid answer. When you buy a home and plan to refurbish it, fix it up, basically invest with no sure fire way of knowing you will make a decent profit, is it even worth it? Homes that need to most work tend to be the cheapest (and with good reason),so what are the pros and cons of doing this?

 

[Nicholas Wallwork]

Yes good area George

For me you need to have a very good understanding of the costs involved and pick deals with a very good margin... if costs overrun you can loose all the profit so research is a major key to success and you will get better as you go on. don't expect to make millions from the first deal and don't expect every deal to go perfectly... if you do 3-4 deals per year then expect one to break even or possibly loose a small amount... overall if you stick with it, get better with knowledge you will make money overall.

the other area of risk is the market... if you don't turn around your deal quickly you are open to market fluctuations. pre 2008 it was easy to make money doing this as the market was booming, even without refurbishing people were flipping to make money. Now as the market is increasing a bit more steadily you need to pick deals that you can add real tangible value to. hopefully this means true property developers will success and weed out those who are just trying to make a quick buck from a rising market...

Yes there is money to be made flipping and refurbing BUT pick the right deal and ensure you turn it around quickly and add real, tangible value...

 

[Donpetuchi]

Yes good area George

For me you need to have a very good understanding of the costs involved and pick deals with a very good margin... if costs overrun you can loose all the profit so research is a major key to success and you will get better as you go on. don't expect to make millions from the first deal and don't expect every deal to go perfectly... if you do 3-4 deals per year then expect one to break even or possibly loose a small amount... overall if you stick with it, get better with knowledge you will make money overall.

the other area of risk is the market... if you don't turn around your deal quickly you are open to market fluctuations. pre 2008 it was easy to make money doing this as the market was booming, even without refurbishing people were flipping to make money. Now as the market is increasing a bit more steadily you need to pick deals that you can add real tangible value to. hopefully this means true property developers will success and weed out those who are just trying to make a quick buck from a rising market...

Yes there is money to be made flipping and refurbing BUT pick the right deal and ensure you turn it around quickly and add real, tangible value...

Nicholas
Really useful reply. My main area of concern is options for financing the first project. My background is architecture and have been in the industry for a number of years and would like to kick start development albeit from one -off small residential and other than researching and getting the right project any advice on how and where to source funds. I can comfortably put together a cost and business plan but would appreciate your advice.

 

[Nicholas Wallwork]

@Donpetuchi - there are lots of options for financing but the best option will depend on how much of your own capital you have to invest? Or any other security you might have to put up for the bank? Impossible to suggest ideas without knowing that...

 

[Donpetuchi]

@Donpetuchi - there are lots of options for financing but the best option will depend on how much of your own capital you have to invest? Or any other security you might have to put up for the bank? Impossible to suggest ideas without knowing that...

Many thanks Nicholas.
I've provided a summary of my current situation as a responce to an earlier feedback from you.

 

[nmb]

I have seen quite a few property flipping programs in America which make it look unbelievably easy (but it isn’t). If you can buy the property at the right price and keep within the budget for your refurbishment there is no reason why you cannot make good money. The only downsides are the market going against you and/or delays/cost increases which will very quickly eat into your potential profit margin.

With property flipping there is no doubt that time is of the essence.

 

[Ben Kinder]

As with anything else it's about timing. If you've got the funds, make an investment on a bargain, fix it up, wait... rent... wait... sell when the time's right. My brother is making a very, very good living from this strategy right now. It's working for him.

 

[Longterminvestor]

There is good money to be made in flipping property but, assuming you get the right property in the right area, you have to do it very quickly in case the market goes against you. The more of your own capital you can put into the project the less the financing costs which can eat into your margin with over runs, etc.

 

[michael1978]

I love the idea of property flipping and if you have the skills you can do great. Of course you have to be realistic about it, at the end of the day you want to make money. But if the cost is worth it and you are lucky to find some cheap properties you should go ahead and do it.

 

[Longterminvestor]

I would be interested to know what kind of margins flippers work on. Those who flip a lot of properties on small margins could see it all unravel with just one bad deal. Any flippers on here?