What to look for when house flipping

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 that house flipping is tricky,” says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, “is because real estate is primarily a long-term investment strategy. 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, then you will need to find the right kind of property,” he states.

He adds that those who are looking for a quick flip should look to find a home that needs work in an area that is experiencing above average house price appreciation. According to the latest Lightstone Property Indices report as at end May 2024, national year-on-year house price inflation currently stands at 3,22%. This varies per province, going as high as 4.3% in the Western Cape and as low as 0.23% in Gauteng.

Similarly, for those who are looking to purchase 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 South Africa stood at R8 654 in Q1 2024.

The renovation potential of a home is also incredibly important when it comes to house flipping. “Focus on improvements that offer high returns on investment, such as kitchen and bathroom upgrades, as well as all necessary repairs. It is important to carefully calculate these renovation costs and ensure they fit within your budget while still allowing for a good profit margin,” Goslett advises.

The existing structure of the home is another vital consideration when flipping a home. “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 minimize holding costs and allow for quicker resale,” Goslett notes.

Market conditions also play a role here. Goslett says that in neighbourhoods where there are fewer homes for sale and where homes sell quickly, flips are likely to move faster, reducing holding costs and risk. Chatting to a local real estate expert will help you find out how long homes are typically staying 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 potential for profit and can help you minimise the risks associated with the flipping process. If you are serious about getting into the house flipping game, then set up a meeting with your nearest agent today for some market insights and advice,” Goslett concludes.

Writer: Kayla Ferguson