Investing in real estate is one of the major asset-building exercises that currently assures great returns if done the right way. Since condos are built on good locations with modern amenities their demand continues to grow and that’s the reason many in the real estate business are leaning towards holding condo properties and reselling them at a profit. Condo flippers must have an extensive understanding of the legal issues surrounding the flipping business model as well.
What is flipping?
Flipping can be described as the practice of purchasing a property or an asset for a short holding period with the intention of selling it quickly for a profit rather than keeping it for a longer duration. Flipping involves purchasing an apartment and then renovating it so that you can sell it quickly for a profit. The purpose is to make improvements within the property so that it appeals to prospective buyers and renters who are willing to pay higher for that property. Since that will make it more valuable to the real estate investor, the flipper can sell the unit for a higher price.
Is flipping condos different?
The main difference between condo flipping and flipping other houses in the way investors view and value the property. The purchase price tends to be lower for condos as compared to single-family homes. Flipping condos is all about purchasing a distressed condo, renovating it quickly, and selling it for a profit.
While flipping properties, you’ll find that renovating a condo rather than a single-family home is a better alternative.
If you are a newbie in the world of real estate flipping and want to test out the profit margins of buying and selling a property for quick money, then flipping condos is something you can try. There’s a lot of scope in the Toronto condo market and you can check out their website.
What are the advantages of condo flipping?
Because of the smaller square-foot area and the absence of a backyard or a front entryway, shared walls, condos cost less in any given real estate market. This usually works out for new flippers who may not have the initial capital to work with.
Since condo owners don’t have to maintain the roof, the foundation nor the exterior structure, you’ll end up doing mainly cosmetic changes to the property.
There are fewer condo flippers in the market. Experienced house flippers tend to pass on condo flipping since it involves fewer renovations, resulting in thinner margins. This creates a space for the rookie real estate investors in a less-populated market of condo flipping.
While doing condo flipping, there’s less competition from landlords since condo associations don’t allow the units to be rented.
Things to keep in mind while flipping a condo
Before you start buying and selling properties, get familiar with the current market conditions and trends. Do your research. Find the right location to invest in. Study what kind of properties can fetch easy buyers as per the consumer demands and preference. A condo flipper must be mindful of the different profit margins.
The key to flipping is finding and buying the right property that can be renewed without overshooting your budget. You may have bought a place on a bargain deal but if there are too many renovation costs involved, it may not give you the right return of investment.
Know the laws
Flipping may be lucrative but it is not that easy. Along the way, you would be dealing with title concerns, mortgage loan fraud, breach of contract or agreement, settling disputes with a bad contractor, and getting a legal construction permit. In these cases, you may do basic research online for quick answers or consult a real estate lawyer for clarity. Additionally, consulting a mortgage broker such as Spear Mortgage would also prove to be helpful to ensure you’re getting the best terms.
An eagle-eyed flipper will take advantage of foreclosed properties that land in the market due to unfortunate circumstances like a death in the owner’s family, divorce, downsizing, and bankruptcy.
Try not to get attached to the house or the condo. While doing the renovations, keep in mind that you aren’t doing this to cater to your personal tastes but for getting profits when it is sold. Hence, focus on fixes that will ultimately improve the value of the place.
Set a realistic timeline to finish your project. Create your own real estate business plan for condo flipping. It is best that you take professional help for major repairs. For smaller fixes, if you can do on your own with the help of friends or family that will reduce some costs. However, trying to save on labor costs shouldn’t bring the quality of the place down.
Check for any renovation restrictions since few condo associations impose their own rules about it. Get your upgradation plan approved and assessed legally and include its cost in your plan. Also, take into account if there’s a monthly fee charged to the owners by the condo association.
Getting the best out of your condo flipping
Setup a parameter that will help you leverage the most profit from your condo.
- Pricing the property – What’s the ARV (After Renovation Value)?
- What will be the carrying cost of the property – the costs incurred from the time you buy the place till the time you finally sell it?
- What will be the total cost of the renovations?
An answer to these questions will help you decide the best purchase price. Then find the reliable contractor who will work on your renovations. Budget the unexpected costs that can eat into your savings and funding carefully. Finally, sell your condo at the right price keeping in mind the value of the property and the cost of the renovation.
Highlight the features of the condo that can appeal to prospective buyers during staging. While putting up your own ads, you can give the potential buyer a sneak peek into your newly constructed condo by adding good photos. Photography, which wasn’t always digital like today, can be an important part of your selling process.
This should set you up for condo flipping. It comes out to be a cheaper and less risky exercise as compared to fixing and selling full-fledged homes. Just be careful with all the number crunching, get help concerning this you’d be on your way flipping condos.