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«Flipping» residential real estate is one of the most popular forms of real estate investment in the world. Despite the high risk, for example, when compared with earnings from rent, it is able to bring large incomes in a relatively short time. The meaning of «flipping», in other words, short-term resale, is the correct understanding of the current state of the market.
In most cases, an investor needs to «catch» the market at a fairly early stage of growth and find cheap real estate on it. Usually these are «unwanted real estate» - properties whose sellers want to get rid of them as soon as possible and are ready to reduce the price. In newly acquired housing, quick repairs are carried out, usually cosmetic enough so that it gives enough new real estate value, but does not lead to large expenses. Further, at one of the peaks of the market, this housing is being resold at a more expensive price, which has increased due to the low purchase price added from the repair cost and price growth due to the growth of the market.
From the practice of «Buy-and-Hold» (purchase with retention) flipping is distinguished by the fact that the investor focuses primarily on the speed of the sale of real estate, and not on the absolute profit that can be obtained from it. If investors «Buy-and-Hold» usually wait for the «most profitable» peak in the market and this expectation can stretch for years. Flipper investors use significantly shorter time intervals and smaller price fluctuations in the market. Instead of one large transaction, they will prefer to make several flops over the same period.
This is a profitable business model that has gained popularity among a whole galaxy of celebrities, including Leonardo DiCaprio and Diane Keaton.
The key to the right investment
Such an investment model is extremely popular in the United States, and in recent years it has begun to spread actively in Spain. Especially in large cities such as Madrid and Barcelona, on the south coast of the country in Marbella, Estepona and Sotogrande.
As mentioned above, before starting an investment, it is necessary to choose a location and a property, and then conduct a thorough assessment of it, of course with the help of a specialist. The main thing is to sensibly assess whether it is possible to carry out repairs in a short time and with minimal costs. If there are any serious defects in the building, this is definitely not a suitable option. At the same time, a good location will help you quickly find buyers. It is necessary to understand the target category of the buyer, for example, the proximity of places such as schools, medical institutions, parks and walking areas is important for families.
However, it is always necessary to understand when to stop. Not every repair is needed and not everyone will play into the hands of the sale. It is necessary to understand what is being sought in the market today. For example, interior design began to play a big role after the pandemic — style is important. At the same time, the greatest attention should be paid to the repair of the kitchen and living room, since residents spend most of their time in them today.
According to experts, in conditions of high inflation, which may reach 10% in the next few months, makes this type of investment extremely attractive. Real estate has the property to grow in price according to the rate of inflation, which also makes it a fairly safe asset in the current situation.