Flipping Real Estate has become one of the fastest growing sectors in the property investment field in the latter years. It is not for the faint hearted as it requires a certain amount of skill in finding the right property, negotiating the best deal possible and also in finding a buyer before settlement.
The essence of Flipping Properties
The strategy behind this property investing method is to buy a new property off the plan, negotiate a top price with the developer who will be looking to get commitment from buyers so that his finance will be approved. It is quite probable that the investor can purchase the property at a price anywhere between 15% – 20% less than the expected final sale price as developers are keen to get contracts signed in the first instance and the development started.
Not only that, it is quite often possible to secure a property at 5% deposit.
It would be expected that the investor will pay some stage payments along the way, but they will not be overly large as it will be in the earlier part of the development.
Finding the second buyer
Once the first contract has been signed the buyer then needs to actively seek a new buyer for the finished property to settle before the property is completed. Hence, the initial buyer does not have to fund the full amount of the sale, thereby not having to meet commitments of stamp duty fees.
This part of the process if important to the success of the strategy and this is where the expertise of marketing of the ‘flipper’ comes in. Unless the initial buyer has a list of potential buyers, the property needs to have an aggressive marketing program in place to move the property before settlement date.
The aim of the process
Profit is the object of the exercise. With no stamp duty to pay the initial buyer (the property investor) stands to make a profit, but the real aim is to sell the property at a higher price that was agreed on the initial contract.
The developer has managed to sell a property and get finance and start his project, the investor has the chance to make a good gain in just a few months with little outlay and the second buyer can walk into a newly finished property.
If it all works well, it is a win/win/win situation.
This could well be a strategy that you might like to use in 2011 as property prices increase as it is predicted they will do in the latter part of the year and also as developers become more active.