For most of us moving house is an exhausting, stressful and, thankfully, infrequent experience. But Emma Jones is not like most of us.
Over the past decade Emma has been locked in a cycle of buying, renovating and selling properties, a practice known as flipping.
According to Hamptons estate agency, about one in 60 house sales in the UK are bought by would-be flippers, who range from seasoned professionals to experienced amateurs and outright beginners, all aiming to add value to unloved homes.
While rising house prices have helped flippers over the past 18 months, the pandemic has thrown some new challenges in their path, not least the shortage of materials and skilled tradesmen.
Emma bought her first property in 2013 when she was 24, a single mother with a day job as a mortgage adviser. The £55,000 three-bedroom former council terrace in Newton-le-Willows, Merseyside, was sad and dated, but Emma moved in with her daughter, now 15, and oversaw a £10,000 refurbishment.
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Early in 2014 she sold the house for £85,000, making a £20,000 profit. She has barely sat still since. Emma, 33, has worked her way through seven houses and is in the process of buying an eighth.
“It was TV shows like Homes Under the Hammer that gave me the idea, plus I was working as a mortgage adviser and I was meeting customers who were doing it. I thought: ‘Why can’t I do that?’”
Emma’s strategy is simple. She buys a house in need of improvement, moves in and then upgrades it. If she was not able to sell it for a decent margin she would simply stay put until prices increase enough to make it worth her while to sell.
Her most recent purchase was in the summer of 2020, just after the property market reopened after the UK’s first lockdown.
Emma, now the managing director of the mortgage and insurance company Alder Rose, bought a two- bedroom bungalow in Frodsham, Cheshire, for £170,000.
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“It had been on the market, and under offer, for £200,000, before lockdown but the buyers pulled out,” she says.
Since then Emma has been living in a building site while working on her most ambitious project to date, adding rear and side extensions to the house and doubling its size.
The finishing touches inside were completed last month, and when the driveway has been laid she will put the now four-bedroom house on the market. She spent £150,000 on the work, and hopes to sell for £500,000, netting her a profit of about £180,000.
“My dream is to be mortgage-free and living in a nice house with some land,” says Emma, who had a baby boy three months ago.
“How many more houses will I have to do to get there? Two, maybe three. Sometimes I do think, ‘What am I doing?’ and I don’t even tell my mum when I buy another house, but it will be worth it in the end.”
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According to research by Hamptons, enthusiasm for flipping peaked in 2007, when about 1 in 27 homes were being bought and sold within
a year. Numbers fell during the financial crisis and reached a low point of 1 in 83 in 2014.
Since then they have edged up again, reaching almost 1 in 42 sales by 2019. During the pandemic levels fell slightly, and now 1 in 59 homes is bought and sold within a year.
Unsurprisingly, considering the relatively low buy-in costs and strong price growth, today’s UK flipping hotspots are mostly in the northeast and northwest of England. Co Durham is leading the charge: 14 per cent of its properties were flipped in the past year.
Making a profit is far from a certainty, however.
Hamptons calculates that 3.8 per cent of homes in the northeast were flipped in the past 12 months, 68 per cent of them at a profit averaging about £25,000. The other 32 per cent were sold for the same price they were bought for, or less.
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The most successful region for flippers was London. Although high entry costs mean that only 1 per cent of its homes were flipped in the past year, 88 per cent were sold for a profit, averaging £154,390.
Estate agents say that the key to a successful flip is buying cheap and understanding the local market. “The ideal flip would be a decent if somewhat dated family home, ideally something pretty, that by careful enlargement can be further enhanced,” says Kevin Allen at John D Wood in Lymington, Hampshire.
In theory, says Ian Kitson, who runs the Cheffins property auctions in the east of England, there is money to be made from simply “refreshing” a tired property.
“Something that requires a cosmetic refresh will be simple and quick to do, but the potential uplift in value and therefore profit is more modest as there is greater competition and the risk is low,” he explains. “At the other end of the spectrum, a property that requires significant structural work, or extension, is likely to appeal to a smaller range of buyers. The funds required are larger, the property might not be mortgageable, and works will likely require more specialist skills. But the potential profits are greater.”
Jack Reid, co-founder of Orlando Reid estate agents, which operates in London and Manchester, says that urban properties are more in-demand and are a better bet than buying a “doer-upper” in a remote village.
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“All-out wrecks are preferable to slightly tired property as more often than not there is more scope to add value,” he says.
Before setting out on a flipping project, buyers should do some simple maths, says Kitson. How much to buy, how much to do up (and remember projects tend to cost more than you plan for), and what will the property potentially be worth once completed? Factor in buying and selling costs, and have a plan B, such as renting out the property or moving in yourself, in case you are unable to sell at the right price.
Allen believes that the main pitfall buyers fall into is overspending on finishes. “To be successful you have to know from the very outset who the property is aimed at by way of its marketing,” he says. “It is no good overinvesting in finish if the location of the end product can’t justify it. One is only as good as one’s postcode.”
Unless you have a big pile of cash lying about, how to fund a flipping project is always going to be an issue.
Emma started out using personal loans to fund her renovations, until she had built up a kitty to pay for the work. Some flippers remortgage their main home while others take a bridging loan. Put simply this means being able to put down a 25 to 35 per cent deposit on a property and then raising a short-term mortgage to buy it.
You will, of course, also need some cash to start the work, before perhaps returning to the lender to arrange funding to complete it. Interest rates, Emma says with her mortgage adviser hat on, are between 0.49 per cent and 0.75 per cent. Buyers can either pay their interest monthly (a £100,000 loan at 0.75 per cent would result in a monthly bill of £750) or they can “roll up” the payments.
This means calculating how much interest would be payable over the course of the loan, usually 12 months, and taking that away from the loan amount. On a £100,000 loan at 0.75 per cent this would cost £9,000, meaning you would receive £91,000.
Anyone considering going into the flipping game clearly needs to take independent financial advice. It does not take an expert to realise that the risks are high.
The work could take longer than you expect, or cost more, or the finished property not sell as fast as you had hoped. You also need to check whether you are liable for capital gains tax and remember stamp duty will need to be paid.
The pandemic has also moved the goalposts.
“The strong market conditions since the housing market reopened in the middle of last year have provided an unexpected opportunity to make a decent profit for the doer-uppers and has allowed some others to ride the market and sell on without upgrading,” says Lucian Cook, head of residential research at Savills.
It has also created practical difficulties, though. “Materials have increased in cost, and their availability has been challenged at times, says Roger Punch, a consultant with Marchand Petit in Devon.
“The greatest change has been the nonavailability of specialist tradesmen — electricians, plumbers, roofers, builders. Effectively all skilled trades have been in high demand, and there simply are not enough of them.”
Experts’ top tips
Buying the worst property in the best area always provides the greatest potential. Match the standard of finish to the level of the local market — the posher the address the smarter the finish.
Roger Punch, consultant with Marchand Petit, Devon
When it comes to aesthetics, go for something contemporary and neutral, and use natural materials where possible.
Josephine Ashby, John Bray & Partners, Cornwall
When working out your margins don’t forget buying taxes — if you buy a home to flip, but not to live in, it is a second home and you will pay a 3 per cent stamp duty surcharge. To make a serious profit you need to add floor space by converting a loft or building an extension.
Matt Turner, director at Rash & Rash estate agents, Southgate, north London
A good flip is driven by the price you pay for the property in the first place, and you should aim for a minimum profit margin of 20 per cent. Remember that even a quick flip will take seven months to a year.
Neil Dawkin, director of HOP estate agents, Leeds
Most flippers start with small flats and move up the size scale as they get more experienced and — almost more important than anything else — develop a reliable team.
Nina Harrison, buying agent for Harington’s
Emma Jones’s flipping life
Left
House 1 Three-bedroom former council terrace in Newton-le-Willows, Merseyside.
Bought for £55,000 in January 2013.
Spent £10,000.
Sold for £85,000 in February 2014.
Right
House 2 Three-bedroom detached house in Newton-le-Willows.
Bought for £140,000 in late 2013.
Spent £12,500.
Sold for £180,000 in 2015.
Left
House 3 Four-bedroom detached house in Warrington, Cheshire.
Bought for £160,000 in 2015.
Spent £20,000.
Sold for £230,000 in 2016.
Right
House 4 Three-bedroom terrace, Warrington.
Bought for £130,000 in 2017.
Spent £10,000.
Sold for £165,000 in 2017.
Left
House 5 Three-bedroom 1930s semi-detached in Newton-le-Willows.
Bought for £120,000 in 2017.
Spent £30,000.
Sold for £210,000 in 2018.
Right
House 6 Two-bedroom terrace in Frodsham, Cheshire.
Bought for £130,000 in April 2019.
Spent £3,000.
Sold for £155,000 in February 2021.
Left
House 7 Two-bedroom detached bungalow in Frodsham.
Bought for £170,000.
Spent £150,000.
Sold for To go on market at £475,000-£500,000.
Right
House 8 Two-bedroom detached bungalow in Frodsham.
Buying for £330,000.
Will spend £150,000 budgeted for renovation.
Sold for TBC.
