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Posted by admin on August 4, 2021

What is house flipping and how much money can you make on it?

In texts concerning the Polish real estate market, we can more and more often come across phrases such as “house flipping”, and for several years it has been an activity that is undoubtedly one of the most popular ways to earn money in this sector. So what does house flipping entail? Although it is probably a new concept to many people, the principle behind it is actually as old as the hills – buy cheap, sell dear. The idea is to find a property at an attractive price, in need of renovation, often a major one, restore it to a much higher standard, and then sell it at a significant profit (to some degree it resembles stock exchange mechanisms). Unlike people who offer their flats for rent, thus gaining a long-term and stable source of passive income, house flippers aim at high profits in a much shorter period of time – even if you operate in a small town, one transaction may bring you from several dozen to over a hundred thousand zlotys of pure profit!


What flat is suitable for flipping?

There are of course no hard-and-fast principles in this regard, but a good point of reference is to look primarily for properties whose value has fallen by at least 30% compared to the market price. Of course, there is nothing to stop you from investing in a more expensive property, but this does require one to make a larger contribution, which not everyone can afford.


Contrary to what you might think, it is quite common to come across offers where the price is well below the market average and therefore perfect for flipping. Sometimes the owners of such properties want to find a buyer as soon as possible. There may be various reasons for this – emigration and starting a new life in another country or a sudden need for cash to cover unexpected expenses. It may also be connected with getting a flat as inheritance. The heir is not always interested in keeping the property. This is just the tip of the iceberg – patiently browsing through pages with sales offers will eventually pay off! Just remember, the competition never sleeps and is also eager to make their own flip.


Remember to check the flat

Finding a property that might be suitable for flipping is only the first step in the whole process. A thorough on-site inspection will be essential. If you are not too familiar with the construction industry, try bringing someone who does it professionally to help you assess the condition of the property. If possible, come with a member of the renovation crew you are hiring. This will make it much easier for you to plan the schedule of work and prepare an estimate. It is also worth getting a rangefinder for the site visit so that you can check the dimensions of the property straight away.


Being cautious at this stage will definitely pay off, since it will allow you to correctly calculate the required amount of money to put in the flat as well as the cost of necessary repairs.


What costs should be kept in mind when flipping?

Of course all expenses related to the renovation should be added to the price of the flat. Determine how long the renovation may take and take unpredicted circumstances into account (sudden illness of renovation crew members, lack of materials, etc.) – this is crucial as it will help you estimate the property’s selling price. Remember that above all you want to make money! Flipping where you earn less than two thousand zlotys a month is not worth your time.


Once the renovation is made, you should also think about the design. The safest option is to go for a modern décor that is quite neutral and can be easily customised. This way, you will not discourage potential buyers who do not even consider buying flats which are arranged according to specific aesthetic guidelines (e.g. minimalism, retro style, etc.)


What else should you bear in mind when running a flipping business?

Short-term real estate trade, because that’s what flipping is, is an organised commercial activity under the law and, as such, is subject to appropriate taxation. So be sure to pay your fair share on your profits. Also, pay attention to the VAT regulations – it is 19% on the sale of a property if the flat has been used for less than 5 years. Of course, tax rules apply to many more possible situations, so it would be a good idea to hire someone solely responsible for accounting. Invest your time in finding offers and organising renovations instead of delving into legal codes (which are amended from time to time anyway).

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