Eco-Flipping: Make More Money from Property Development

Sustainability is becoming a lot more important for homeowners around the world. One study found that 38.5% of homebuyers purchased eco-friendly properties in 2019. According to another survey from Rate It Green, 68% of consumers want to purchase an eco-friendly property.

That figure is probably going to keep rising even more. Some research suggests that the coronavirus pandemic has made consumers more eco-aware, and demand for eco-friendly property is certainly on the rise in the UK.

So, is “eco-flipping” the next big thing in property development? Can you boost the return on investment from your next project by making it greener?

What is “Eco-Flipping”?

“House flipping” has been a familiar term in the property development industry for many years. Flipping is when an investor or developer buys a property and sells it quickly for a profit. This can happen when a developer bags a bargain and manages to sell it fast for a higher price than the purchase amount, but more commonly, the profit comes from improving the property and boosting its value.

Eco-flipping is a relatively new term that refers to buying a property cheaply, improving its energy efficiency or otherwise boosting its eco-credentials, then selling it for a profit. As interest in more sustainable housing grows, eco-flipping is an increasingly profitable income stream for property developers.

Is Eco-Flipping Profitable?

More house hunters than ever before are prioritising sustainability as a requirement for their new home. This means that selling your property could be easier to sell if it is environmentally friendly. And for developers, selling a new-build house may be a much quicker — and therefore more profitable process — if it is more sustainable.

Furthermore, the government is planning to introduce changes that will make it harder for people to sell properties that do not meet minimum energy efficiency standards as part of its Net Zero strategy.

Recent research suggests that many Brits are willing to pay more for an eco-friendly home too — £23,271 more, to be exact.

So, if you’re looking to make a profit when selling an eco-friendly property, eco-flipping could be worth considering.

How to Choose a Property to Eco-Flip

The following features could indicate that a property is a great opportunity for eco-flipping:

• Well-built with a solid structure — well-made homes will stand the test of time, making them more sustainable and appealing to the eco-aware buyer.
• Only minimal cosmetic changes are required — this will leave you room in the budget for eco-friendly upgrades.
• The location will appeal to eco-aware buyers — for example, an area with access to green spaces, local business, cycle paths and good public transport links.
• Affordable price — this may seem obvious and applies to all types of property flipping. To make a profit you need to buy low and sell high!
• Improving the EPC rating won’t cost the earth — every residential property must have an Energy Performance Certificate (EPC) before it goes on the market. Eco-flippers need to raise a property’s rating by making affordable changes to still turn a profit.

5 Mistakes to Avoid When Eco-Flipping Houses

1. Spending too much on buying the property — as a general rule of thumb, stick to no more than 70% of the expected resale price, minus the cost of any improvements needed.
2. Underestimating renovation costs — do your research and, if necessary, enlist the help of a property finance professional to set a realistic budget and target sale price.
3. Poor planning — set a realistic project timeline that will ensure you hit milestones and complete on time and within budget.
4. Not asking for help — it’s unlikely that you will have all the skills and knowledge required to choose and implement the most profitable eco-upgrades. Hiring professional help is an outlay, but it will pay off in the long run.
5. Rushing to buy a property — the most successful property developers know when to wait and when to pounce on a property. Choosing the right investment is key to delivering a profitable project.

Eco-flipping is on the rise, and with demand for eco-homes soaring, it can be a profitable “quick win” for investors and developers. Do your research, plan your time with care, surround yourself with the experts you need and keep a close eye on the budget to ensure development success.