Flips, refurbs, or doer-uppers

With the help of TV shows like George Clarke’s Flipping Fast, property flipping has become a fast-growing trend in recent years. Property flipping involves purchasing a property for a low cost, renovating it until it’s desirable and then selling it on for a higher profit margin.

According to a recent study, 92% of property investors have made a profit on their property flip[1]. In the UK, the findings highlighted that over 60% of properties that were flipped in the last two years resulted in a profit ranging from between £10k to £75k.

AREAS EXPERIENCING THE FASTEST PRICE GROWTH

However, location is key when it comes to successful property flipping. Investors should focus on areas experiencing the fastest price growth to earn the best return on investment. Based on a study conducted by Best Heating 2022, the top three locations for flipping properties between 2020 and 2021 were Manchester, Nottingham and Liverpool.

These cities saw significant increases in property value and had easy access to home improvement stores for renovation resources. In Manchester alone, over 20,000 properties were sold with an average value added through renovation of £19,000 and an average house price increase of 26% in the last five years.

CONSIDERATION TO LOCATION AND MARKET TRENDS

Similarly, Nottingham saw an average value added through renovation of £18,000 and an average house price increase of 37% in the last five years. In Liverpool, investors could expect an average value added through renovation of £20,000 and an average house price increase of 12% in the last five years.

Overall, with careful consideration given to location and market trends, property flipping can be a lucrative way for investors to generate short-term profits or long-term income plus capital asset growth.

ASSESSING THE COST OF FLIPPING A PROPERTY

The cost of flipping a property heavily depends on the condition of the property and the amount of renovation work needed. According to the survey, 40.96% of people budgeted between £11k and £25k for renovation work, with 23.98% of people budgeting less than £10k, closely followed by 22.88% of people budgeting between £26k to £50k.

Apartments/ flats in residential blocks (44.86%) were found to be the most common properties to flip, followed by terraced properties (32.27%) and semi-detached properties (26.87%).

PRACTISE SENSIBLE BUDGETING WHEN RENOVATING

New kitchens are the most common renovation, completed by 69.35% developers, potentially adding 5.5% to the value of a property. Bathroom renovations were completed by 62.64% of developers, adding between 4% to 6% to the value of a property, while redecoration was completed by 35.86%, potentially adding 3.1% value.

Investors need to practice sensible budgeting when renovating properties, since higher renovation costs require higher sale costs for maximum profit on a flip. Long-term trends show that buy-to-let properties tend to rise faster than inflation, making it an attractive opportunity for investors looking to benefit from a sale or diversify their property holdings amidst market fluctuations predicted in coming years.

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