Flipping houses involves buying a property, renovating it, and selling it for a profit. House flippers take properties that most homebuyers aren’t able or willing to renovate, and improve them to the point where they meet buyer demand.
Below is How To Flip Houses In South Africa
You can make money from flipping houses, but do your homework to make sure you choose the right property. A business plan is essential to guide you to success.
Flipping houses often starts when people with creative or decorative flair, some financial means, time on their hands, and/or an eye for a bargain find a way to channel their energy into a passion project. For many, this is their main business, for others, it’s a sideline.
You can make money from flipping houses, but do your homework to make sure you choose the right property for the home loan finance available, should you need finance, so that you can be sure of making a reasonable profit once your renovation is complete.
With interest rates currently at their lowest point in five decades, now is a good time to purchase a home using a home loan. The low rates improve your chances of making a profit.
Here’s a guide to flipping houses for beginners in South Africa:
Set a budget
Once you’ve decided on what you’re prepared to invest, and have approached a reputable bond originator such as ooba Home Loans to assist you in securing the home loan finance to do it, should you need finance, set a budget for the renovation and stick to it?
Location, location, location
Buying the worst house in the best area and renovating it will get you a better return than the reverse scenario.
If you’re new at house flipping, you’ll want some advice on location. Real estate agents are a good source when it comes to tracking property prices per area. Look at sales over the preceding six months. Also look at positive influences on property prices such as low crime rates as well as proximity to schools, public transport, retail centers, and/or neighborhood supermarkets as well as recreational areas and outdoor spaces such as public parks.
You can also use Property24 to check property trends throughout South Africa. This tool allows you to see the seasonal and long-term changes in property prices and sales throughout the country.
Develop a business plan
Know how much you can spend on renovation and whether that investment will be enough to gain the profit you’re looking for when you’re ready to sell.
Decorate for your target market
There’s no point decorating the property according to your taste – you’re not going to be living in it – so set your sights on enhancing what can be improved without spending a fortune to make it design magazine-ready.
Build an effective team
Your team can make or break the job if you’re not doing it yourself. Ask reliable and competent builders, architects, electricians, plumbers, painters, handymen, and landscapers to quote on whatever it is you need and to confirm their availability before you commit to the purchase. Referrals are often the best recommendation. Depending on how big the job is, you might even need a project manager to make sure the project stays on track and that everybody meets the agreed project completion deadline.
Hire professionals
You’ll also need an attorney to draw up contracts and an accountant to help set up your business administration for tax purposes. You need to know which expenses to track prior to submission of your tax return and which ones can be written off.
How much does it cost to flip a house in South Africa?
The standard formula for a profitable flip is to pay no more than 70% of the value after renovations, minus the cost of the project. For example, if the value after necessary renovations is R2 million, and the cost of repairs is R300 000, you should pay no more than R1,1m for the property.