Partner Article

Flexible Bridging Finance a Popular Choice for House Flippers

On average, research suggests that a typical house flipping project will net those involved a profit of between £10,000 and £75,000. By contrast, just 1% of house-flipping projects result in a loss. But while the likelihood of making a loss from a property flipping project is relatively low, accessing affordable funding for such ventures isn’t easy. Particularly when it comes to mainstream banks and lenders, there are comparatively few products available that provide the fast-access, short-term funding needed to flip homes for profits.

This is one of many reasons why bridging finance has seen a major spike in popularity over recent months. With average UK house prices hovering at record highs, more new and established investors than ever before are setting their sights on house flipping projects.

“For many people, bridging loans offer the best solution when they’re buying to sell,”

“They can be arranged more quickly than mortgages and provide more flexibility in lending terms,”

“Despite soaring property prices, talk of crashes and general uncertainty, with 63 per cent of flippers in the UK saying that they believe now is a good time to invest in the property market, combined with increasing searches on Google, it’s great to see this sentiment and property flippers clearly see opportunities ahead for healthy profits to be made.”

Even in the midst of an unprecedented financial crisis, more people are looking into the prospect of flipping homes for profit than has been the case for several years. July and August this year saw around 32,000 Google searches logged for ‘flipping house’ – up a huge 77% compared to the same time last year.

Affordable inventory on the UK Housing market is dangerously low, resulting in ferocious competition among prospective buyers and investors. Increasingly, those who are able to beat competing bidders to the punch with fast-access finance (like bridging loans) are finding themselves with a major advantage.

The Principles of Successful Property Flipping

Speed is almost always of the essence, where flipping properties for profit is concerned. According to the study conducted, almost 70% of all property flips that took place over the last 12 months were completed within six months. In addition, those looking to flip properties for profit need to come up with the funds needed to purchase properties outright within a few working days (or a maximum of four weeks for auction property purchases).

All of this highlights the importance of seeking and arranging fast-access funding in advance, with a suitable facility like a bridging loan. In addition, further guidelines regarding the principles of successful property flipping were shared, in order to help first-timers maximise the profitability of their investments:

1. **Apply the 70% rule** – This refers to a simple calculation that can indicate whether a project will be profitable. After working out exactly how much you expect to be able to sell the finished property for, you subtract 70% (plus all borrowing costs etc.) and this is how much you should be looking to pay for the property in its current condition.
   

2. **Allow for contingencies** – Keeping cash reserves of at least 10% of the total budget on hand at all times is essential, in order to deal with any unexpected eventualities that may occur.
   

3. **Be realistic** – As much as some of the UK’s most popular daytime TV shows may give such an impression, flipping homes for profit is rarely as quick, easy, or stress-free as it looks.
   

4. **Compare the market** – When seeking affordable finance for a house flipping project, always enlist the support of an experienced independent broker, who can compare the market in full on your behalf.
   

This was posted in Bdaily's Members' News section by iCONQUER Ltd .