House flipping, if done correctly can offer tremendous benefits and help reap greater returns. Flipping involves buying a property at a lower rate, investing in the renovation, and then selling the same at a premium price. It is not only a lucrative business but also has other benefits. If done correctly, it can help remodel and makeover old and/or low-value properties and make them more valuable. In this way, flipping can be instrumental in turning around stuck inventories and rendering them a new life.
Although flipping looks simple, it requires the right approach and meticulous planning to make the right returns.
Here are some proven strategies one can adopt if looking to make higher returns.
Pulse of the market
Before investing, it is important to learn about the pulse of the market. Real estate investment always requires detailed planning and strategies and one has to do a lot of homework. Anything done in haste might be counterproductive and won’t give the required results. Knowing and learning about the market entails keeping track of the trends, learning more about the demand drivers, estimating future price movements and projections, etc.
Find the suitable property
Once you thoroughly know the market, it is now time to identify the suitable property option. There might be some alternatives, and as a seasoned real estate expert, one has to zero down to the most suitable one. While evaluating the property price, the 70% golden rule should be followed. As per the rule, one should not pay more than 70% of the proposed selling price minus the renovation charges. For example, if one is planning to sell a 2-BHK apartment for ₹80 lakh and the makeover/ renovation charges are ₹15 lakh, the cost of the property should not be more than ₹41 lakh. Here negotiation skills are also important so that one doesn’t overpay for a property.
Spend strategically on makeover
The premium that one will charge on a property will largely depend on the makeover and redesign. One has to spend smartly to give a strategic, functional, and aesthetic makeover to the property. Hire skillful resources who can add value to the property and enhance its marketability. Enhance paints, décor, security features, furnishing, flooring, etc., to give it a new look, so that its market value can be improved significantly.
Redesign into high-demand assets
During the makeover, one can also mull redesigning the property into high-demand assets such as student accommodation, bachelor accommodation, rental property, etc. which are in high market demand. Redeveloping and redesigning a property into a new asset type will naturally push the market value. For instance, take the organised student accommodation market, which is growing at a staggering pace. As per Colliers, by 2036, India will be home to 31 million migrant students. Such a huge market demand naturally pushes the value of an asset northwards.
Resell the property
As the final step, one has to resell the property. Once again negotiation skills are essential, as they can help in reaping the best benefits. The objective is to sell the property at a top value. Patience is also important, as reselling is not always easy and can include a good amount of stress.
However, with the right approach and carefully planned strategies, one can lower risk and maximise return on investment.
The writer is Director, RPS Group.
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