What Investors Need to know about Property Flipping

Posted on March 31st, 2016
Thought Leaders
metallring mit fünf alten schlüsseln auf hellem hintergrund

Depending on where in the country you are, as you walk or drive past many neighbourhoods you are likely to see properties which are in a near dilapidated state –  from the iconic four-room houses eKasi (in the townships) to the much bigger houses in the suburbs and even skyscraping apartment buildings in the city centre like those in downtown Jozi (Johannesburg).

Many owners are unable to maintain their properties mainly due to the high costs of looking after them. While in some instances these properties are occupied by tenants who barely put in any effort to maintain both the interior and exteriors, others are repossessed and a few are abandoned altogether.

With all this urban and property decay emerges a trend of flipping these rare gems into good investment properties with the potential to yield good sales and rental returns.

As a result, before buying and investing in this type of properties one needs to fully understand the dynamics which comes to play with such an investment. There are a number of factors that one needs to first consider prior to purchasing a property to flip and getting some returns.

Maintenance process

Owing to their dilapidated conditions and dependent on the extent of the damages, maintenance in the form of refurbishment becomes the biggest factor to consider when buying a property to flip around. Some degree of maintenance will be required to bring the properties back to a liveable and attractive standard.

As part of the planning stages of purchasing a property to flip it is essential that an investor put aside enough funds for all the repairs which will be required once the sale process is completed. Underestimating these costs can have dire consequences on the investment, and the acquisition can end up becoming too expensive while taking longer to yield good returns on the investment.

An investor needs to plan well ahead and save enough to cover for the entire refurbishments costs of the property and any unforeseen issues which might arise. It is highly advisable that an investor involve professional maintenance people in the planning stages of their purchase, so that they can give accurate estimates on the costs which will be necessary to bring the property to a good standard.

And in a situation whereby the maintenance job is on a bigger property such as flipping a multistory block of flats, it will be of good help to seek the assistance of a project coordinator or manager to help with the project.

Municipal and eviction costs

In the case where the property has been repossessed by the bank, an investor will need to be very mindful of the possible municipal and eviction costs which might become part of the sale process. These costs are usually not included in the purchase price and vacant occupation is also not always guaranteed.

The new owner might find themselves having to apply for an eviction order to lawfully remove the occupants from the property, adding unnecessary costs and delays to the investment. These expenses can sometimes be high and hit the investor hard in the pocket, causing some undue delays in the flipping process.

However, if an investor has a clear indication of the estimates of a flipping project and has saved enough money to cover all necessary costs, then they can proceed purchasing dilapidated properties to flip around. And with all the necessary boxes ticked beforehand, then an investor will make a sound investment by buying and flipping properties with great potential to yield good stable returns.

About Lesiba Mooka: Lesiba Mooka is the  founder and CEO of Cobalt Blue Properties an all-inclusive property services firm. Mooka is a real estate entrepreneur from Mahwelereng, Mokopane in Limpopo, with an undying love for investing in different kinds of properties and helping others build a solid property portfolio of their own. You can also find him on Twitter at @CobaltBlueProps