The term flipping house refers to a way of investing in real estate, whereby one purchases a house, renovates it and then sells it in a short space of time. This technique which is carried out by investors, even though it is still not very well known in Spain, is taking place more and more having originated in the United States where it has been practiced for some time. Suffice it to say that during the first term of 2022, one out of ten houses that were sold were later renovated and sold again. This means that in the United States flipping house is a booming business and in the light of what we are seeing in Spain and in other European countries the same thing is happening. We can state that this modality of investment is starting to set a trend in Europe and it is also spreading to other countries. The flipping house methology is to make a good house renovation investing as little money as possible and later selling it quickly so as to obtain a quick financial gain. While there are no statistics that currently show the flipping house impact in Spain, some real estate agents state that this investment technique has created a small revolution in our country. In 2020, a small niche in the real estate market was noticeable when property was bought, renovated and then sold. Only a year later, in 2021, the growth became exponential as according to real estate agents the deals at least doubled.
HOUSING BELOW THE MARKET PRICE
One of the golden rules of flipping house is to invest in housing which is below the market price. Why? First of all, and logically, so as not to start from a large-scale investment because the investor will qualify and value the property once it has been renovated. Because of this, investors will look for houses in poor conditions which will thus make their market price cheaper. This is where an important part of the business lies: many people would never buy a house in poor conditions. However, these are the properties that investors are interested in, because after having purchased them for a below the market price, then they will improve them with a good renovation. Most of the times, a complete renovation must be undertaken because many of these houses are very old and their layout must usually be changed so as to make the most of the space. Even though this may require a major investment, it will also entail that the flat, once it has been renovated, its market value will increase significantly. Let us imagine the difference between a flat with old doors, windows and gotelé walls with one that the walls have been smoothed, and new doors and windows have been placed. This is another key rule: the new elements that are used in a renovation are quite cheap but they serve to make the house look presentable and hence increases its value.
SPEED IN RENOVATING AND SELLING
In order to sell a flat well, it is very important that it be in a good location and has an appealing aspect, giving the sensation of being a new flat. In the large cities, a brand new flat is especially valued by homebuyers who are often willing to invest on second-hand property but not so much in undertaking the process that an important restoration implies. This is another key element for investors in flipping house because the flat for sale will be totally restored and thus create a very positive effect on the possible buyer. It is important that the restoration process does not take long as the investor is interested in putting the flat up for sale as quickly as possible. In point of fact, one of the characteristics of this business is the speed with which the flat is sold after having purchased it. It is calculated that this process is usually carried out in, approximately, five months.
Picture 01: geotatah
Picture 02: pvproductions