There has been a major increased interest in house flipping in South Africa.
Flipping houses is a lucrative business that can make you money, but to succeed you’ll need to put in the time and effort and also have a solid business strategy.
In this article, we reveal how you can make money from flipping houses.
What Is House Flipping?
Flipping houses is simply buying a house with the intention of renovating it and selling it at a much high price, gaining you more profit.
It is a real estate investment because you can profit quickly by buying low and selling high (within a short space of time).
Several techniques can be used to flip houses, this includes:
- Refinancing
- Renovations and maintenance
- Lease-to-own
- Brief sales
Finding houses to flip is the first step, which can be difficult in and of itself. You’ll need to research neighbourhoods and keep an eye out for “For Sale” signs to find out where individuals are selling their homes. You’ll need to research a house after you’ve found it: What is the pricing on offer? Are there any significant problems with the home? Is it in a state that would justify the price being asked?
The exciting part is fixing up the house after you’ve decided whether or not it’s worth buying and flipping. You’ll need to hire contractors, and they’ll charge you for their labour and supplies (which can be costly). You need to generate interest in this new property once they have finished working on your old one through marketing. Then comes closing, which is the procedure of approving the sale.
How to Get Started
Although flipping homes can be a lucrative business, not everyone is suited for it. There are a lot of factors that you need to consider before starting a house flipping business.
Following is a guide on how you can venture into flipping houses, potentially turning it into a successful business.
1. Have a budget
You’ll likely need to put down some cash upfront (at least R300 000). This will be a deciding factor of whether you can afford to pay the bond and ultimately secure the best home finance deal.
On top of this, you will need to have enough money for the renovations, so, having a set budget is very much necessary for this business.
2. Find the right house
In finding the right house, location matters the most. The goal should be finding the worst house (with the potential to be great) in the best neighbourhood. Consider how close the house is to reputable schools, shopping centres, and parks.
Look for areas where employment is expanding, and property values are rising as these are signs that the area is thriving. Avoid areas where there are frequently many properties for sale because this could indicate a struggling local economy, a lack of residents owing to crime, or unfavourable new developments.
Talk to a few estate agents in the area you’re considering to learn more about the residents of the area and use this knowledge to inform your house-hunting process and your decision regarding what work needs to be done to a home as part of the flip.
You should concentrate on homes that simply require a few quick, simple, and inexpensive renovations. Look for properties that might be rapidly transformed for resale at a profit by replacing the flooring, painting, adding new bathroom fixtures, and gardening.
With a little practice, you can figure out how much various house improvements will cost and determine whether or not a certain property is a viable investment.
3. Don’t overspend
Making a profit on your investment is the goal of house flipping, so if you overspend on improvements, you’ll need to sell the house for more money than you invested. No matter how high-end the finishings are, buyers that are searching at the top end of the market are price-savvy and won’t pay an inflated amount for your house.
Any property’s worth is not exclusively based on its qualities and the improvements that have been made; rather, it is influenced by its location, the amenities nearby, and recent transactions in the neighbourhood.
4. Build a great team and have a timeline
You’re probably going to lose out on the transaction’s maximum worth if a house flip takes years to complete. To avoid such mishaps, make sure you have a crew of plumbers, painters, handymen, and electricians on hand before signing the dotted line to buy the house.
This ought to be organizations or people you have already dealt with or who have been highly recommended by a friend. Your home flip will be more cost-effective the faster and more efficiently the work is completed.
5. Renovate with the current home trends in mind
Never buy a house and renovate according to your taste as you won’t be occupying the space. Rather be aware of the new styles and current home trends. Focus on improving what can be made design magazine-ready without spending a fortune.
Remember, you won’t become wealthy by purchasing pricey properties; you must find good deals in order to profit from them. For a successful flipping house business, you will also need to be well organized in order to keep track of all of your spending and earnings.
House Flipping Risks
As much as flipping houses can be considered a way to make quick money, there are also some risks involved in this type of investment.
One of the biggest risks of flipping houses is that you might not be able to sell the house for as much as you paid for it. If you run into problems with financing or repairs, then you may not be able to sell the house at all.
Another risk of flipping houses is that market conditions might change before you can sell your property at full market value. For example, if interest rates rise dramatically after you buy your property and start renovations on it, then buyers may not be willing to pay as much for it as they would have when you first bought it.
The goal is to sell the house, right? When all renovations are done and you are happy with the improvements now, its time to get the “ching ching”. Yes, you can sell the house yourself but, a real estate agent can help you market the house to the right buyers and widen your reach. So, don’t sleep on real estate agent, if necessary do hire them to assist.