Flipping as a method of making money on real estate has been known in the West for many years. In Poland, they have been talked about for several years. What do they consist of? In short, a flipper buys an apartment, then as a result of a well-thought-out renovation with the use of good materials and appropriate equipment, he increases the value of the property to sell it at a profit in a short time. Therefore, it trades in real estate by introducing a much more modern, more qualitative product to the market, tailored to the needs of the market.
Residential flips
For such a scenario to be possible, you now need experience, extensive knowledge of the market, proven processes and an experienced team. The result of the investment will depend on factors such as:
- the purchase price of the property (you need to be able to buy an apartment at a price below market value, you need to have access to attractive offers before they go on the open market, you need to cooperate with sourcers and developers, you need to have negotiation skills)
- renovation costs (a proven construction team that meets deadlines and fits within the specified costs is one of the most important elements, you also need access to dozens of suppliers who, thanks to long-term cooperation with them, offer attractive discounts on materials)
- other costs (you need to have knowledge of taxes and finances, maintain cost discipline, be able to predict all possible burdens, e.g. property maintenance costs).
- time from purchase to sale (the best flippers can fully prepare the apartment in 40 working days)
- sale price (you should understand the market perfectly and be able to produce beautiful and functional apartments that meet the current needs of customers in order to get a high price)
after-sales service (selling an apartment is not everything. It is crucial that you do not have to spend time and money on possible repairs during the 5-year warranty period. When preparing an apartment for a flip, it is worth using proven materials and furnishings so that they stand the test of time as well as possible)
In fact, making money on flips will be an effective method of multiplying capital only while maintaining a rigorous “housing production process”. You have to act quickly, effectively, prepare apartments economically, but at the same time take care of very high quality.
Residential flipping, i.e. quick real estate turnover, is a high-risk activity for inexperienced people. A mistake in choosing an apartment, underestimating the costs of renovation – all this can even result in painful financial losses.
Therefore, a novice investor should think about a professional partner. This variant is more and more often chosen by those who take their first steps in flipping. In Pracownia Nieruchomości, we have the “Joint 50/50 flip” service, which consists in our partner investing in the purchase of the property and its finishing. We, on the other hand, using our experience, knowledge of the market and knowledge, search for the cheapest apartment with the greatest potential, then complete all formalities related to the purchase, design, renovation and finishing. When the apartment is ready, we find a buyer and sell the property with a profit, which we share in half. How much can you earn? We estimate the return on such an investment at nearly 30 percent per year – to be divided in half.
REITs
The so-called REITs (Real Estate Investment Trust) – in other words, funds or companies that derive profits from the rental of real estate – both residential and commercial. Their genesis dates back to the 60s of the last century and the United States. Currently, they exist all over the world (however, there are still no Polish REITs, their legal status has not been defined). A person who “enters” this business earns on regular dividends and a potential increase in the value of a given fund.
The downside – compared to the “traditional” purchase of an apartment for rent – is the fact that we are dealing more with the financial market than the real estate market, and this means much less peace, much greater volatility and risk. To put it simply, an investment in a REIT listed on the stock exchange is simply an investment in shares of companies from the real estate sector (most often in the USA).
Commercial real estate
If you are planning to invest in real estate, you are of course not doomed only to housing. Capital holders may also consider investments in commercial real estate – e.g. commercial premises, land, commercial facilities, etc.
The return on such an investment may be tempting, but it is not a business for everyone, primarily due to the costs – the entry threshold for such a segment will be much higher than apartments for rent. In addition, it is not worth doing it blindly, because you can easily lose money. Each of the commercial real estate markets – whether the land market or the commercial premises, office or warehouse market – has its own specificity and separate conditions. Without knowledge of the specifics of a given market, it will be difficult for you to invest consciously.
Real estate abroad
A very tempting segment of the market are flats and houses abroad. Prices of residential properties in well-known, recognizable, top foreign locations can surprise with their affordability. An example is sunny Spain. It is a location that is extremely popular among compatriots as a place to invest in apartments outside Poland.
Why the boom in Spain? In addition to the tourist and natural values, the prices of flats in this country are also important, which often turn out to be within the reach of the so-called average Joe. What’s more, buying a property in Spain, a few thousand kilometers away, can be extremely simple. It can even be done remotely, provided that you have the right partner to help you with it. As Pracownia Nieruchomości, we will be happy to guide you through the investment process and complete it with you by buying a beautiful apartment located a few hundred meters from the sea in locations such as Costa del Sol or Costa Blanca. The whole thing will take from 4 to 6 weeks. We will take care of all the formalities, thanks to a local lawyer, acting on your behalf on the basis of a power of attorney.