Learn to flip houses profitably
Buyers must pay attention to the resale value of the area and current housing trends.
The house flipping game is one of high risks and high rewards. For those who do their research thoroughly and lean on the advice of industry experts, house flipping can be an incredible wealth generator, but it won’t come without its challenges.
“The reason house flipping is tricky is because real estate is primarily a long-term investment strategy,” says Adrian Goslett, the regional director and CEO of RE/MAX of Southern Africa.
“It takes time for a home to appreciate enough in value for it to cover all the related expenses – such as transfer duty, bond initiation fees, agent commission, etc – and generate a profit. If you want to turn a profit quickly, you will need to find the right kind of property,” he states.
He adds those looking for a quick flip should look for a home that needs work in an area experiencing above-average house price appreciation.
According to the latest Lightstone Property Indexes report, at the end of May 2024, national year-on-year house price inflation stands at 3.22%. It varies per province, going as high as 4.3% in the Western Cape and as low as 0.23% in Gauteng.
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Similarly, for those looking to buy a home as an investment property, it is also worth considering areas that reflect higher-than-average rental returns.
According to the latest PayProp Rental Index, the average rent in SA stood at R8 654 in Q1 2024. The renovation potential of a home is also crucial when house flipping.
“Focus on improvements that offer high returns on investment, such as kitchen and bathroom upgrades, and all necessary repairs. It is important to carefully calculate these renovation costs and ensure they fit into your budget while still allowing for a good profit margin,” Goslett advises.
The existing home structure is another vital consideration when flipping a house.
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“Properties that already match the size and layout preferences of the target market – for example, open plan layout with the right amount of bedrooms and bathrooms – will require less capital outlay to fix and will also require shorter renovation periods, which will minimise holding costs and allow for quicker resale,” Goslett notes.
Market conditions also play a role here. Goslett says that in neighbourhoods with fewer homes for sale and where homes sell quickly, flips are likely to move faster, reducing holding costs and risk. Chatting with a local real estate expert will help you learn how long homes typically stay on the market in the area.
House flipping can be challenging. Choosing the right property is essential to be successful. Thankfully, you don’t have to do it alone.
“Working with a real estate expert can help you to identify which homes have the best profit potential and can help you minimise the risks associated with the flipping process.
“If you are serious about getting into the house flipping game, arrange a meeting with your nearest RE/MAX agent today for some market insights and advice,” Goslett concludes.
