Kieran Chalker, a real estate agent from London, recently shared some strategies on how he earned £675,000 from flipping properties bought off plan.
Let’s start with the property.
Chalker and a group of other investors bought a three-bedroom flat in The Corniche. “The Corniche” are 2 residential towers located on the Albert Embankment in London. It’s being developed by Foster + Partners and set for completion by 2017.
Chalker and his 5 partners were able secure a flat for a deposit of only £50,000 each and then, seven months later, they were able to sell it to a Russian couple for £3.75 million! This led their group to a £675,000 profit, less their original £307,000 investment.
Now let’s move on to strategies you can employ to replicate this success!
It’s crucial to talk with the developers beforehand about your plans for the property, because not all developers allow the flipping of newly built flats. Some contracts include clauses which ban physical modification to units and this will ruin your investment plans if discovered too late in the development stage.
Think twice if you’re going to buy an expensive flat. Buying an expensive unit off-plan poses great risks for the investor, since you may not be able to sell it for a profit.
Other important considerations are the location of the development and, surprisingly, the reputation of the developers too! Chalker admitted that The Corniche’s river side location contributed a lot in attracting demand from buyers. Other experts advise looking for a development that’s near the tube station or a school. On the other hand, you can use the developer’s reputation as a way to attract more foreign buyers to your property.
Michael Goldmann, sales and marketing director at Regal Homes, adds that investors should time their purchases correctly. Apparently, buying an off-plan property will only yield profits if it’s bought as far from the completion date as possible. Goldmann explains that this will help cushion any effect of minor market changes before the project is completed.
Buying during the early stages of development is also the time when the prices are at their lowest, that’s why investors are encouraged to buy during this period. If you buy a few months before the turn over, you won’t get a chance to ride the market movement upward.
While there are great rewards for those who take the risk, there’s still no guarantee that buying off-plan properties will lead to profits.
Ray Withers, chief executive of Property Frontiers, warns that the current house pricing indexes predict a slowdown for London property prices in the next few years.
Estate agent Simon Armitage, of Druce in South Kensington, added that flipping properties only yield profits when the market is on the rise. Thus, if the market is unstable, it’s better to look for other investment strategies to try.
I hope that that these insights have given you fresh ideas on how to profit from real estate. Just remember that flipping off-plan properties requires good timing – so avoid buying on impulse. Remember to do your homework to mitigate risks and you should be fine!