The art of flipping: how to buy property off-plan and sell at a profit

Buying off-plan and selling fast - hopefully at a hefty profit - is back as the London property market powers ahead.
Flipping, one of the great money-making trends of the last property boom, is back. It’s a sport of chancers but in a fast-moving market with a property shortage there is money to be made if you make the right call. There are also fingers to be burnt.

Estate agent Kieran Chalker has just scooped a £675,000 profit from flipping. After helping a series of clients buy off-plan flats and rapidly sell them on at a hefty premium without even taking possession, Chalker, managing director of Garton Jones estate agents, got in on the act. In January, he and a group of fellow investors reserved a £3,075,000, three-bedroom flat in The Corniche, a tower being built on the Albert Embankment and not due to complete until 2017.
 


As the flat was bought off-plan, Chalker and his fellow investors had to find only 10 per cent of the sale price, just over £50,000 each, to secure the flat. In July Chalker sold the property on to a Russian couple living in London. They paid £3.75 million, which netted his six-strong group a £675,000 profit, less their original £307,000 investment.

Chalker cautions that not all developers allow flipping of new homes, and it comes with risks. “There is obviously no certainty that you will be able to sell at a profit,” he says. “We bought one of the most expensive flats in the development and knew we were taking a big risk.”

He advises flippers to investigate their chosen area and buy in a high-end scheme by an internationally known developer. The Corniche was designed by Foster + Partners for St James. Chalker also feels river views made the flat very saleable, and the site’s strong sales had indicated keen interest.

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Invest in an icon: the first flats in the redeveloped Battersea Power Station caused a sales stampede when released in 2013

Jeremy McGivern, managing director of Mercury Homesearch, agrees research is vital. “The big danger is that too many speculators target the same high-density developments and then try to flip at the same time, and the demand dries up. Then those who can’t complete will lose their deposit.”

Michael Goldmann, sales and marketing director at Regal Homes, advises: “Look for a property where the completion date is far enough in the future to cushion any effect that a minor slowdown in the market may have.” Flippers should buy in a popular location and it’s crucial to be close to a Tube station, while proximity to an international school or university could be a plus.

Ray Withers, chief executive of  Property Frontiers, feels flipping is too high-risk, and warns that most current house price indexes forecast a slowdown in the London market over the next year. Estate agent Simon Armitage, of Druce in South Kensington, says flipping only works while the market is on the rise. “There are also no signs that it will double in the way it has done in recent years,” he says. 

However, Chalker, while admitting the market faces “peaks and troughs in the next 12 months”, is confident enough in central London’s continuing appeal to overseas investors to have ploughed his recent profit straight back into a Battersea Power Station flat, and tips flats in Embassy Gardens, later phases of the power station, and One Nine Elms as having potential for flipping. “I ditched pension plans years ago to put what money I have into the London property market,” he says.

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Flipping hot tip: The Embassy Gardens apartments at Nine Elms on the South Bank


TOP TIPS: THE ART OF FLIPPING
> Always check with the developer - some have clauses banning flipping, while certain mortgage lenders also take a dim view of the strategy.
> Buy at the development’s early stages when prices are at their lowest. If you buy just a few months before completion, you give yourself no chance of riding the market upwards.
> Choose a scheme with appeal for overseas buyers, near an international school perhaps, or a starchitect design.
> Never sign up for a property without a Plan B of what you will do if you can’t sell it on.
> Don’t buy cheap and nondescript in the suburbs. The liquidity is in top-notch specifications and locations.

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