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Flippin investments!

This is not the rant of somebody where there buy-to-let investment has gone horribly wrong. It actually describes a style of investment which involves buying an off plan investment (one that hasn’t been built) and then selling it on before the project is completed.

The person who is speculating in the rising value of the investment is called the ‘flipper’. The great thing about this style of short term speculation is that whilst capital gains tax would be due on any increase in value, there will be no stamp duty to pay. Also there will be no requirement for a mortgage, no voids and no tenants. The gamble that any body that tries to ‘flip’ an off-plan development takes is that prices will go up sufficiently for it to be worth enough to cover the effort and the risk and the loss of potential earnings whilst your capital it tied up as a deposit. There are ways of reducing to a minimum the capital required. Have a look at my recent article on the Property Bond.

The risk that any ‘flipper’ takes is that they will be able to find somebody who wants to buy the property, should this not be possible they must be prepared to follow through with the purchase and become a ‘fully fledged’ landlord. Be under no illusion this is a high risk strategy. If you get it right for a few thousand down you can make tens of thousands profit. This is a great return on your capital . The risks if you get it wrong by paying too much or buying a property during a falling market is that you could end up tens of thousands down . This style of speculation should only be attempted by experienced investors who are well aware of the risks and can correctly identify areas and properties which have potential. With the surge in London prices recently this area offers the best potential and there is some evidence that the practice has returned. But with the uncertainty in the global economy and the expected slowing in house price growth it would take a very confident speculator or a psychic to be able to predict the state of the housing market in 12-18 months time.

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