House Flipping with Shay

Lally from ‘@Houses to Restore

This month Fleming Real Estate were lucky enough to chat with Shay Lally the QS behind House to Restore Instagram Page. A beloved page that provided helpful tips for renovation projects.

Question Time

What is House Flipping?

A. Flipping houses involves buying a property, renovating it, and selling it for a profit. They’ll buy the home, make any necessary repairs, improve the systems, style, and design of the property (hence adding value to it), and sell the house at a profit within a few months.

House flippers take homes that most homebuyers aren’t able or willing to renovate, and improve them to the point where they meet buyer demand. Keep in mind that the average home buyer wants a house that is turnkey and ready to move in.

Q: Is House Flipping for me?

Like any investment strategy, house flipping has its pros and cons. Because it requires such an investment, ask yourself the following questions before deciding to flip a house;

How much is the House?

Is it affordable and can I make a profit?

Is it the right market right now to flip?

Remember you want to be able to mark up the price so you will need room to grow! If you buy a home at the max price, you are not likely to make any profit. Talk to a realtor if you are unsure what a good price looks like in your market!

Q: What’s the market like? Is demand high to buy a home?

If you’re flipping a house, you want to be able to sell the house pretty fast.

What condition is the home in? How much work are you able to handle? This is where a Quantity Surveyor comes into play. Decide on what your renovations budget is and discuss with your Quantity Surveyor what needs to be done etc.

Financing. Do you have enough money to cover the cost of the home, closing costs, and all the expenses associated with repairs, upgrades, marketing, and selling it?

Also are you patient? House flipping requires a-lot of patience. Renovations are not done in a day

Steps included for House Flipping;

Research the Markets
Not every market is a good fit for flipping houses. The less cash you cash to start off with, the smaller the project will be and the cheaper the house. So do your research and find suitable homes with your budget and research the market what they would typically go for. Important questions to ask yourself; How much cash will you have to work with? What markets can you afford to flip your first home in?

Create a budget and business plan
House Flippers are entrepreneurs – they’re in a business so they need a business plan. It doesn’t need to be anything fancy but it’s always recommended to have good project management skills to be able to execute the job properly. You will need a budget, timeline and project scope.

Get financing

Most House Flippers will be cash buyers. Cash Buyers will have cash for the whole project. But many banks will lend a mortgage under ‘investment property’. You will need to acquire 30% of the Loan. For more details, contact your local mortgage advisor and they will be able to assist you with all the available options.

Start networking with contractors
If you are in the construction industry, kudos to you, this one will be easy! Make sure you shop around, everyone has a different price tag, so it’s crucial to shop around just as you would with your mortgage/solicitor.

Next Steps

Find a house to flip

After researching the market, sorting out financing you can start to make your first big move. These houses will typically be run down and need a lot of work so it’s always best to have a Quantity Surveyor to do a scope of the house for you and ensure what needs to be done. You don’t want to be stuck with a job too big.

Buy the house
Once you have decided on a house and have talked about what needs to be improved, you can go ahead and make the purchase! You will need to pay extra fees such as Legal Fees and Stamp Duty in the process. These both range from 1% – 2%.

Start the renovations
Probably the hardest part, but a good Quantity Surveyor can lead you in the right direction!

List the house with a Realtor
Get in contact with us will give you a valuation of the house. Then we will price Marketing fees and boom, we are ready to place it on the market! Marketing places a huge role in flipping. Houses are known to sell at a much faster rate and higher rate when professional photography and staging is introduced. This is essential to get the maximum value for your work!

Sell the house

Once placed on the market, now you have to let the agents do all the work! A great thing with flipped homes is that they tend to get a lot of social media coverage and press coverage online! Don’t be shy and reach out to these accounts like @houses_to_restore, @inspiringhomes.ie.

Pay Taxes and Fees

Selling Real Estate where you have flipped a house, you will have to pay a tax called ‘Capital Gains’. This is 33% of the Profit you have made on the flip. So for example, if you have bought the house for 300k, and sold it for 400k, you will be liable to pay Capital Gains tax on the 100k, so 33% of 100k = 33.3k. However, the costs of capital improvements can also be deducted.

There will be other costs too included in the process of selling a house including Legal Fees, Marketing costs (photography, staging, daft ads) and Agency Fees

We asked Shay, What does add value to a home?

When house flipping it is important not to get too personal when it comes to deciding on fittings and finishes.

In most scenarios, high end/ premium brand fittings will not ever produce a profit or return for you.

The following items are good things to focus on

Fit-out the bathrooms so as they appeal to the majority of people. By redoing the bathroom it will reduce the need for those viewing or purchasing the house to do any “messy work”.

Bright and well decorated open plan family rooms will help to increase the value as this is something everybody is going for.

Decorate all other parts of the house in a neutral tone do not insert any statement design features of colour palettes that will turn people off.

Execute any repairs to the roof, gutters, chimneys or downpipes as these are items that cause worry by reducing worry you increase interest and this increases the price the house eventually sells for.

Make sure the house has good kerbside appeal so as it feels welcoming and inviting when people pull up outside.

Style the entrance door with pots, plants and light fittings as this will create a good first impression

Avoid any attic conversions whereby the attic will only be considered as storage when you go to sell

Avoid adding things like porches, garden rooms or sunrooms as they don’t tend to deliver any profit

Alexandra Moore

Author, Shay Lally @housestorestore

8 March 2020

alexandra@flemingre.com

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