Buying to sell is a common route for those serious property investors looking to increase their pot of capital quickly, move on to bigger investments, or, in some cases, gather the funds for a property of their own. If you are interested in taking this path, then it should be encouraging that you can start (relatively) small.
For sure, you are going to need the capital to purchase a property (so you cannot start from nothing) but it is a misconception that you need to be a property magnate with a large portfolio or large amounts of capital in order to follow this route.
Buying to sell is sometimes conflated with purchasing a so-called “fixer-upper”. A fixer-upper is a property in a condition that can be improved significantly enough to see a profit after a resell. CityHome Collective, a professional real estate brokerage with years of expertise in selling luxury homes, advises however that this is not the only type of property that those looking to buy to sell typically purchase.
For one thing, purchasing a fixer-upper only works if the property can be renovated significantly, thereby increasing the likelihood that it can be sold for significantly more than the purchase price. Accordingly, it is usually only houses in quite significant state of disrepair that are appropriate for this type of buy-to-sell approach. But there is another way.
Table of Contents
The Seller, Not the Property
The other means of buying to sell concerns the seller and not the property. Sometimes, the seller finds themselves in a situation that necessitates the sale of their home as quickly as possible.
Generally, the types of situations that would lead someone to sell quickly include a divorce, a sudden financial shortfall, emigration, or, in many cases, dying. All these personal reasons will see a property go for significantly less, allowing the potential for a profitable buy-to-sell, often with no extra renovation work required.
How to Successfully Buy to Sell
Such are the two situations that could lead to a property becoming a profitable buy-to-sell opportunity. Naturally, the first step to successfully doing so is therefore keeping an eye out for these types of properties on the market.
Once you have found a promising opportunity, here is how to go about it:
Run the Numbers
In the case of finding a fixer-upper, you need to crunch some numbers ahead of the sale in order to ensure it will be profitable. As mentioned, this should involve weighing up the price of the property plus the price of the renovation against the new market value after this renovation is completed.
Nevertheless, while this principle is pretty straightforward, you need to arrive at a pretty good estimate of the post-renovation value. For that, you may require the help of the professionals.
Appraise the Property
And working out what the renovation costs will be is something that can only be done after the property, in its current state, has been thoroughly appraised. Again, you might require professional help here.
When it comes time to sell the property, you need to be prepared to wait for the best offer and to hold firm to what you have estimated to property to be worth. Selling too quickly can lead to significantly less profit (after all, this is the situation in which those who have to sell quickly find themselves, and it is the whole reason the property is cheaper in the first place).
Property flipping – as it is sometimes known – can be a very profitable venture, but you need to patient and smart.