I am going to tell you everything you need to know about the fix and flip opportunities available on the island and why, if done properly, this can be a great way to make a lot of money.
For more in depth information on the house market and on buying real estate in Mallorca, see: www.mallorcapropertyguide.co.uk.
Flipping homes usually refers to buying undervalued property and selling it at a profit. Normally you will give it a refurb to add value before re-selling.
In Mallorca the days of cheap as chips deals went by decades ago of course, back when only the brave and the daring would set foot on the island.
It was very inexpensive back then, but it was also under a dictatorship and the market was inexistent.
Then later, when tourism hit the island, a few visionaries began buying property, but mainly as second homes, as the market was slow.
Now buying a property in the more desirable parts of the island is a luxury, but there are still deals to be had, and with the right help and guidance, you can bag a bargain - fix and flip - and make a killer profit.
Before you start looking for the right property to flip you need to work out how you are going to finance the project.
Will you use your own funds, take out a mortgage, find a cash-rich investor to come in on the project as a joint partner or a combination of all these?
For this to work you will be looking into finding the cheapest finance you can.
TOP TIP : If you are going to get a mortgage to finance the project, make sure it has no tie-ins - You don't want to be penalised for selling the property before the lock-in period expires!
If you are not able to find a lender that will allow you to sell after only 6 months, then consider a longer period to carry out your project or alternative financing methods.
Taxation is a big concern here.
You will need to know how you are going to operate.
Are you going to fix and flip as a sole trader, as a partnership or a company?
Each option will have different tax implications so it is advisable you speak openly with an accountant and establish firstly how each option will affect your costs and ultimately your profit.
Solicitor costs - There will be costs for buying and for selling the property.
Mortgage - Factor in the monthly mortgage payments you will need to pay for the duration of the refurb until you re-sell the property.
Refurbishment - materials, planning, work and labour.
Tax - The taxman will want a cut of your profits, so have a chat with your accountant about your options. If you are planning to do more than one fix and flip project your activities may be considered a property trading business and liable to be taxed as an income, and if you are a sole trader, you may be liable for some tax exemption.
Estate Agent - Commission and marketing fees.
Extras - Factor in 10-15% for unexpected costs, delays and any problem which can and may arise along the way. This will cover you and allow you some leeway.
There are a few large and well-established real estate agents in Mallorca, some are too big to be interested in helping a project of this kind, and others too small to have the deals available.
The right real estate agency will be able to find you a deal worth considering. Help them help you by being very specific about what you are after.
Finding discounted property in Mallorca is an art form in itself.
Firstly, you will have to establish why a property is discounted in the first place. If the owner needs to sell then you are looking at a potential deal.
The best way to go about it is to speak to a trusted real estate agent and ask them to find you a property that needs to be sold fast.
Alternatively, you could try putting ads in local rags and offering a quick sale. This will work best if you are on the island and able to speak to the sellers in their language: in this case, Spanish or Catalan.
If this is not the case, you may be better off leaving the house hunting to a local real estate expert. You can also place a couple of ads and send potential sellers onto your real estate agent to manage the conversation for you.
Handing your new property over to a local builder and walking away, is how a huge amount of foreign homebuyers have found themselves spending way beyond their budget.
Get a quote before you start anything. That's for starters.
Do not just hand a project over to someone and fly back to the UK. You will most likely be left with spiralling costs and possibly not get the job you paid for.
It is important to have someone who oversees the work. A project manager you can trust and who can liaise between you and the workmen on the job. It is an extra expense, but as time is of the essence here, and a good manager will save you money elsewhere, it is worth considering.
In fact, get more than one quote on all the work you want done, BEFORE you buy, and factor this into the costs and profit you hope to get.
You may also consider offering the builder a share of the profits. This can create a huge incentive for him to do the job well, cost effectively and in time. Alternatively, offer a bonus.
The best way to do this is to keep your real estate agent involved in the project throughout. If you bought through them, aim to sell through them too.
Make sure you ask them at the start about the potential flip value of the property you are interested in buying and the time they believe it will take to re-sell.
House dressing - You have finished the refurb, now dress it up a bit. The more homely and inviting you make the place the more appealing it will be to potential buyers. Invest a little in lighting and some soft fabrics.
Make coffee, light the fire. It may seem silly, but it will leave a better and longer lasting impression on the potential buyers.
Our Office in Puerto Pollensa
+34 971 86 57 67You can find us in Paseo Saralegui 48
07470, Puerto Pollensa
Our Office in Puerto Alcudia
+34 871 114 800You can find us in Carrer dels Mariners 8
07400, Puerto Alcúdia
We`ve got
Mallorca Covered
Sign up and be the first to know new listings and great oportunities
