First of all, the idea of flipping a property is not dead as some would have you believe. It will take research, it might take time but there are opportunities aplenty for those looking to do their homework. However, many people do make simple mistakes when looking to flip property, mistakes which can be costly from both a sales point of view and an investment point of view. So, what are the simple mistakes made by those looking to flip property?
Always have an exit strategy
Whatever type of investment you buy you should always have an exit strategy and the same is true with real estate. In a perfect world you would have more than one potential exit strategy and this is possible with real estate. The obvious intention is to buy a property, make some changes and flip it for as big a profit as possible. If for some reason a market turns against you then there may be opportunities to rent out the property on a medium to long-term basis before possibly selling it on.
We hear of many investors who go into new property investments without an exit strategy and kind of get carried along on the crest of a wave. Whether you are investing in property, cars, old books or anything else, you need to have an endgame, a goal, something to aim for.
Structural and cosmetic changes
If you are looking to buy a property which may need significant work you will probably focus more on the structural issues as opposed to the cosmetic changes. Obviously, where there are significant structural issues you will need to invest to show the property at its best but what you will notice is that the majority of changes will be purely cosmetic. Landscaping the garden, painting rooms, new furniture and other relatively inexpensive actions will probably be required.
When looking at discretionary structural changes you need to work out in your own mind whether this work will create an investment return. Obviously, if there are safety issues involved then you need to do the work but if it is discretionary do you really need to invest significant money? Is there a guarantee you will get it back?
Know your market
Knowing your market is obviously heavily linked to the idea of an exit strategy (or more than one) but if you know your local market there is every chance you can flip the property for a profit. Is there demand for a particular type of property? What type of decor appeals to potential buyers? Is it a potentially lucrative neighbourhood? These are the kind of questions you should be asking yourself before you buy any property and before you consider flipping it.
While the idea of flipping a property is to make as much money as possible in the short term, what if there is a potentially game changing move further down the line in your local neighbourhood? Then you are potentially left with a decision to take a relatively quick profit or perhaps a larger profit further down the line with rental income prior to any sale. Decisions, decisions!
Flipping is not dead
While more and more people are looking to flip properties and it is certainly becoming more competitive, this market is certainly not dead. You may need to do a little bit more research, maybe margins are not as generous as they used to be but for those willing to take the time and effort to learn about flipping and how to research local property markets, there is still a living to be made.