We have sourced more than 200 property deals, with around £30 million in agreed purchase prices and a market value of more than £45 million, and I have been buying, renovating and selling property for 20+ years.
Over that time I have developed a fairly simple set of rules for flipping property. They are not particularly glamorous, but they stop me getting excited about the wrong deal, overspending on the refurb or watching the profit disappear while I own it.
These are the eleven I use.
1. Only buy if you can make a 20% markup
Take the total cost of the project, purchase price, renovation and all the other costs, and multiply it by 1.2. If I cannot confidently see the property selling for at least that figure, I do not buy it.
The 20% is obviously there to make a profit, but it also gives you some protection when the refurb costs more than expected, the property takes longer to sell or something else inevitably goes wrong.
2. If it doesn't hit the markup, move on
This sounds obvious, but it is surprisingly easy to start persuading yourself that a deal which nearly works is good enough.
It isn't.
If you have researched the end value properly, costed the refurb and allowed for all the other costs and there still isn't enough margin, move on and find another property.
3. Buy wholesale, not retail
Only around one or two properties in every hundred we look at are genuinely discounted enough to buy.
On a fairly straightforward buy-to-sell, most of your profit is made when you buy rather than when you sell. You cannot pay the same price as everybody else and then hope that a nice kitchen is somehow going to create your profit.
We have sourced deals through estate agents, auctions, landlords and directly from vendors. Where the property comes from matters less than whether there is enough margin in it.
4. Think commercially and move fast
A flip is a commercial project. It is not your home.
The aim with most of our flips is fast in, fast refurb, fast back out again. I do not want to own the property for an extra three months because somebody is still deciding which tiles they prefer.
Every additional week costs money while producing absolutely no income, so once the refurbishment is finished I want the property sold as quickly as realistically possible.
5. Minimum refurb, maximum profit
This is one of my favourite rules.
Spend money where spending it will increase the saleability or value of the property. Do not spend it simply because something would be nicer.
There is a very big difference between renovating a property well and unnecessarily renovating it expensively.
6. Have your team ready before you complete
Keys on a Friday, builders start on the Monday.
You should already know who is doing the work, what they are doing and roughly when they are starting before you own the property.
Then keep on top of the project. I like regular site visits because problems are much cheaper and easier to sort out when you spot them early rather than three weeks later.
7. Renovate to just good enough
One of the easiest ways to overspend on a flip is to renovate it as though you are going to live there yourself.
You are not.
If the £80 version looks virtually identical to the £180 version once it is installed, I am buying the £80 one. The property needs to be attractive, photograph beautifully and feel good when buyers walk through the door. It does not need to win an interior design award.
8. Look for ways to create another room
One of the things I am always looking for is whether the existing space can work harder.
For example, you may be able to move a kitchen into the living space to create a kitchen/diner and turn the old kitchen into another bedroom, subject of course to the layout and relevant regulations.
Adding another usable bedroom can create considerably more value than the building work costs, which is exactly the sort of improvement I like.
9. Do not forget all the boring costs
This is where lots of apparently profitable flips suddenly become much less profitable.
Council tax, water, gas, electricity, insurance, mortgage or bridging interest, private finance costs, legal costs, cleaning and all the other bits and pieces keep ticking away while you own the property.
As a rough rule of thumb, we allow around £8,000 in these additional costs for every £100,000 spent.
Put them into the deal analysis before you calculate your 20% markup. They are real costs, even though none of them gives you a lovely new kitchen to photograph.
10. Don't forget the wow factor
Once you have finished the practical refurbishment, you still have to sell the thing.
You are not really selling bricks and mortar. You are helping somebody imagine this as their home.
Good staging, sensible furnishing and excellent photographs can make an enormous difference without costing a fortune. We have happily used IKEA and B&Q alongside more expensive pieces.
I also want a good property photographer, plenty of strong landscape photographs for the portals and at least one great portrait hero shot that can be used elsewhere in the marketing.
A relatively inexpensive refurb marketed brilliantly can sell far better than an expensive refurb marketed badly.
11. Conveyance like crazy
Getting an offer is not the end of the flip. You have not made the profit until the property has actually completed and the money is back in the bank.
Roughly one in three agreed property sales can fall through before completion, so I do not sit back once we have accepted an offer and assume everybody else will move it along.
Set expectations around exchange, keep asking what is outstanding and chase the chain.
Your solicitor and estate agent have their jobs to do, but it is your property and your money, so take responsibility for keeping the sale moving.
Where to go from here
Those are the eleven rules I come back to again and again when I am looking at a flip.
The big one running through all of them is the numbers. Buy with enough margin, control what you spend, move quickly and do not allow a good profit on paper to disappear through overspending or unnecessary delays.
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