Flipping property: Not easy, but possible
So you’ve watched a few HGTV series about buying rundown houses, fixing them up, and watching the money roll in from sale or rental, and you’re ready to give it a try. It’s colloquially called flipping and, according to Jethro Huie, who has experience with the practice locally and abroad, there’s a lot you need to know to come out ahead.
“Construction on any scale can be stressful, even with extensive planning and investigation. It is not as simple as it may appear on TV shows, and a project in Jamaica can require more personal involvement than abroad,” he cautions.
Founder of Huie Designs, a real estate design consultancy, has more than 20 years’ experience in design and development across the UK and Jamaica. The local construction industry is booming right now, with a lot of new builds, but Huie says there is also an abundance of prospects here to flip.
“In Jamaica’s real estate market there exists a fertile ground for lucrative flipping opportunities, especially for individuals with a creative eye and strategic thinking skills. The key lies in the ability to envision potential beyond the obvious. Older-style properties, often overlooked, present untapped potential for transformation into modern and desirable spaces. A savvy investor can capitalise on these opportunities by bringing such properties into the new era,” he tells the
However if you’re looking for a quick return on your investment you should be aware that local projects often drag on well beyond scheduled completion dates.
“The main factor to be considered before you attempt to flip a property is time. Things can take longer to execute in Jamaica than they do abroad, especially for someone who is less experienced in real estate, so major consideration should be put around making sure the numbers make sense once a realistic timeline and contingency to that timeline have been established,” Huie cautions.
But it all begins with selecting the right property, one that will keep your costs low and generate maximum return — whether you sell it or use it to generate a steady flow of rental income.
Huie advises that you keep an eye out for areas on the verge of an upward trend; the trick is to get in before the boom. If you see a few modern-style homes popping up in an area that’s modestly priced, it’s time to make a move. (So you may have already missed the most profitable period for Vineyard Town, known for its ample land space.) And please note that if there’s a fixer-upper in a pricey area it will not stay on the market for very long.
When choosing a property to flip, factor in issues such as how easy — or difficult — it will be to access material needed when work is being done, and how you will transport it to the property. Even though property prices will be lower in deep-rural areas, if logistics is a challenge during construction then this may eat into your profit.
It’s also a good idea to talk to a few realtors in the area to get a solid understanding of what the market is really like in the location. Huie suggests that you get the actual sold price of a few comparable properties in the area, not the listed or asking price, and also get an idea how long property tends to remain on the market before being bought.
When you’re just starting out you should look for a property that has “good bones”, meaning it’s structurally sound and won’t require complete gutting and rebuilding. You can take on more challenging projects once you have a bit more experience under your belt and have cultivated a solid relationship with a competent contractor, which brings us to one of the most important elements in all of this: ensuring you have a construction crew that will get the job done efficiently.
With the current construction boom in Jamaica it’s a challenge getting tradesmen in every category, from masons to plumbers. Developing a relationship with a trustworthy contractor relieves the property owner of the hassle of having to find and keep individual members of a construction crew. While having a contractor on board will add to your overall cost, Huie believes it’s worth it.
“Considering the complexity of construction and renovation, especially for those without prior experience, my advice would be to refrain from self-managing a project with individual tradesmen on your first project. Therefore, time should be invested and, sometimes, financial resources, at the project’s outset to conduct thorough due diligence when selecting a contractor… It’s essential not to be swayed solely by the allure of the cheapest quote or immediate availability. Instead, prioritise quality and reliability,” he says.
“When selecting contractors, don’t solely rely on pictures; personally view their completed projects and engage with their clients about what their experience has been like. Assess whether they own their equipment needed for your project, and [query] their team’s capabilities. Have they successfully executed projects similar to what you are envisioning? Once you’ve decided on a contractor, have a professional contract drawn up clearly detailing the scope and schedule of works, ensuring you both have somewhere to refer to, stating exactly what is included, and the level of finishes. A quantity surveyor report may also be needed, depending on the complexity of the project,” he adds.
And, finally, let’s crunch the numbers. The goal is always to turn a profit, so before you put down that deposit you need to figure out if the deal actually makes sense. You may find it helpful to keep track of your expenses with a spreadsheet; there are templates available online. What will it sell for or how much rental income will it generate after you have pumped all that money into fixing it up? If you’re thinking of selling the upgraded property, Huie offers useful advice.
“Evaluate what your property offers in comparison to others in the market. Incorporate these numbers into your spreadsheet and utilise lower prices in your analysis to provide a conservative estimate, offering a realistic perspective on the potential value of your property. This diligent approach ensures a well-informed decision-making process throughout the course of your project,” he says.
For anyone thinking of flipping property, the trick is to do your research, plan ahead, and always expect the unexpected. Here are a few more tips from Huie:
• Creativity can add more value than you’d believe.
• Never assume the builder can see your vision.
• Do not allow excitement and visions of grandeur to cloud decision-making. It’s a business.
• Pay attention to the finish of the project.
• Don’t be too personal with it, choose finishes that appeal to your target market.
• Jamaica’s landscape is naturally stunning, offering a beautiful canvas to be framed; create things that add to and don’t take away from its beauty.