Page 8 - Designing Ways 254

TRADE WINDS

Starter’s guide to

flipping houses

ell-known YouTuber Stephen
Baron recently made a
Wwhopping R970 000 profit
flipping a Johannesburg house, receiving
over a million views on his YouTube Andrea Tucker
channel Flipping Johannesburg. If you
saw this and decided you want a slice of
that pie, you may be wondering how to do find a good bond originator, and why leave percent of the ARV of a property minus
it and where to start. your house for this when you can obtain the repairs needed. For example, the ARV
Essentially, flipping a house involves the services of a digital bond aggregator is R1 million. Then assume the property
buying a property, giving it a facelift, like MortgageMe. The company offers will need about R250 000 in repairs. You
and reselling it for a profit. Seems pretty an easy-to-use affordability calculator should not pay much more than R450 000
straightforward, doesn’t it? Andrea where you can upload your recent bank for that property. Keep this figure in mind
Tucker, Director of online bond originator statements showing your income and when looking at properties, and ensure
MortgageMe, says it can be, but you need all your monthly expenses, and it will you look within your budget.
to know what you’re doing. “Investing in calculate what size home loan you can Also keep in mind that you’ll need
a house in order to resell is a big decision potentially afford. Your bond certificate approximately 8% of the value of the bond
and you need to go into it armed with will give you a good idea how much available to cover the expenses incurred in
as much information as possible, while additional credit you can responsibly the process of taking on a home loan and
keeping the risk/reward ratio at front of afford to take on in the short to medium for attorneys to transfer the property into
mind,” advises Tucker. term, taking your current living expenses your name. It is best to have this amount
So, here is exactly that – some into account. saved so that you don’t need to take on
valuable information from the experts Another factor to consider when doing additional credit to fund this. Build this
at MortgageMe to include in your your budget is the ‘after repair value’ into your budget now.
knowledge arsenal before embarking on a (ARV) or the 70 percent rule, which, in the
house-flipping project. real estate world, is the estimated value of Find the right house
the property after it has been renovated. You knew it was coming - ‘location,
Establish a budget This allows you to build extra padding location, location’– the most important
Decide what you can afford to invest into your budget in case something factor when choosing a property. Look
(i.e., loan to fund your investment) and goes wrong. So, the buyer should pay 70 at the home’s proximity to good schools,
retail areas and green spaces. Speak to
a few estate agents in the suburbs that
you’re looking at in order to understand
who currently lives in this neighbourhood
(i.e., singles, families, older couples), and
use this information to guide your house
hunting journey as well as deciding what
needs to be done to a house as a part of
the flip.
Vastly different from looking for your
dream home as a first-time buyer, when
looking for a house to flip, it is a good idea
to find the worst house, but in the best
area, an ugly house that ideally only needs
cosmetic changes in order to transform
it. Elements of a house that are relatively
simple to transform include, floors, walls,
roof, cabinets, countertops, and the
garden. “A fresh coat of paint has one of the
highest returns on investment compared
to any other home improvement. But be
wary of anything structural that needs to
be fixed or replaced (think a leaking roof),

8 Issue 254 • dw