Flipping is the purchase of a home for the purpose of quick resale, an extremely popular way of making money in the West. In Russia, this method of generating income is not yet popular. In this article we will give tips that can help readers successfully make money from flipping.

Drawing up a clear action plan is the first step of any flipper

Well planned is half done. This aphorism is especially relevant for people involved in flipping. Without a clear action plan, making money on the quick resale of apartments is almost impossible. It is necessary to clearly understand the sequence of actions.

1. Analysis of the situation on the real estate market

A novice flipper needs to carefully study and understand the current situation on the real estate market: the average market value of various types of housing, the forecast for changes in their prices in the future, the level of demand for these objects and similar issues. This will allow you to choose the right property to purchase and increase the chances of its quick and profitable sale.

2. A clear spending plan

It is also important to clearly plan how much money will be spent on the entire resale operation, taking into account the price of the property, the costs of improvements carried out in it, advertising for potential buyers, legal support, and payment of taxes.

Since the transaction must be completed as quickly as possible, you should not get involved in a mortgage or take out a loan to obtain the missing funds, because completing all the documents will take a lot of time, and the interest on the loan can “eat up” a significant part of the profit.

When budgeting your financial transaction, set aside a small amount for unexpected expenses. After all, in the most ideal plan, something will always go wrong. It will be a great shame if, because of some little thing, like an unexpected increase in the price of building materials, your carefully planned deal is in jeopardy.

3. Options for compensation for possible losses

Another important aspect that needs to be thought through in advance is calculating the options for compensation for losses in the event that the home cannot be sold for a long time. You can calculate the possible income from the rental of real estate that you plan to purchase for rent.

4. Analysis of legislation on registration of transactions for the purchase and sale of real estate

It is important to analyze the legislation on the execution of such transactions. It is important to clearly understand what documents are needed from the buyer and seller when concluding a contract for the sale of housing, where to go to register property rights, and many other points. This will allow you not to waste time when buying or selling an object.

How to choose the right item to buy

There are several types of real estate that flippers can make money from.

1. Undervalued housing

Apartments or houses near which important infrastructure facilities will soon be built will certainly increase in price after their construction is completed. These could be metro stations, hypermarkets or large office centers.

In Russia, speculation regarding apartments in new buildings in Sochi has received wide publicity. Enterprising businessmen who bought apartments there in advance and sold them before the crisis earned a lot of money in just a few months.

According to experts, a similar situation should occur on the eve of the 2018 FIFA World Cup. The rise in housing prices in cities hosting championship matches should begin several months before the start of the World Cup.

2. Collateral property

Banks hold auctions to sell debtors' property. As a rule, the cost of such a lot starts at 80% and can go down to 40% of the market value of the property. Information about auctions is often posted on banks' websites. True, the flipper will have to constantly monitor them in order to obtain the necessary information, while the most valuable objects are bought by interested parties not at public auctions, but privately, but still some Russians manage to get decent housing at auctions on the cheap.

3. Forced urgent sale of housing

It happens that the owners of an apartment or house decided to move to another city or country or they urgently needed a large sum of money due to unexpected unforeseen circumstances. In this case, they will not have to bargain for a long time and their housing will most likely be purchased at a price below the market price. Such options are not found often, but the profit received more than compensates for all the difficulties in finding them.

4. Apartments without renovation

The easiest option for a flipper is to purchase an apartment unfinished or in a “destroyed” state. According to some data, good repairs increase the cost of housing by 5-10%. And after high-quality finishing of luxury real estate, the profit can be 20-25% of the amount invested in the apartment.

Whatever type of real estate the flipper chooses, he needs to remember that the easiest way to sell is affordable housing that a family with an average income can afford. Of course, you can make a much larger profit on the resale of an elite house or apartment, but finding buyers for such an object is much more difficult.

Having a team of professionals is the key to success in flipping

The operation of reselling an apartment is divided into many stages and each of them requires special knowledge, so for people who want to engage in flipping, it is very important to select a team of professionals, where everyone will be responsible for their part of the work.

You can't do it without:

• an experienced real estate agent who knows the market conditions well, who can select a suitable property and then find buyers for it;
• people who will carry out home renovations or at least (if the flipper does the renovations himself) a good designer who will make a design project;
• a competent lawyer who can take on legal support of transactions.

Competent repairs with minimal costs are the key to success

In order for the interior of an apartment to impress buyers, it is not necessary to invest tens of thousands of dollars in renovation. After all, expensive does not mean stylish. It is much more important to make a good housing design project.

Thanks to it, you can rationally arrange furniture and change lighting, which will help visually increase the space. And the right combinations of colors of walls, pillows, carpets, curtains, furniture upholstery and various accessories, such as paintings on the walls or figurines on the shelves, can add individuality to the interior of the apartment and change it beyond recognition.

The art of selling a home quickly

There are several options for quickly selling real estate, which have been successfully used by all realtors for many years.

Option 1. Impromptu auction

Several potential buyers who have expressed interest in a property are invited to view the property at the same time. This creates the illusion for them that the apartment is in demand and they need to quickly “stake it out for themselves” before the property is “taken away” by competitors. Some enterprising realtors invite fake buyers to a meeting, who, with their increased interest, provoke real clients into making a spontaneous purchase.

Option 2. Telephone auction

The seller alternately calls several potential buyers who have agreed to purchase. After the first buyer agrees to purchase a home at a predetermined price, he dials the number of another, says that the conditions have changed a little and quotes a slightly higher amount. If the second buyer agrees, the number of the third is dialed and an even larger amount is called. This way you can get the maximum selling price for your apartment without spending a lot of time negotiating with clients.

Option 3. Sale to a real estate agency

If you cannot find a buyer for your home for a long time, you can try to sell the apartment to a real estate agency. This option is relevant when there is no buyer for the property for a long time or the flipper for some reason needs to quickly exit the project. A significant disadvantage of this scheme is the selling price. The agency will be interested in the apartment if it sees an opportunity to make money on its resale. And for this, its price must be lower than the market price. With a growing housing market, the difference should be 70-80%, with a falling market - 50-60%.

Tax issue

The main reason why flipping has not become widespread in Russia is the peculiarities of tax legislation. The buyer of real estate is not subject to tax, but the seller is required to pay 13% of its sale price. Let's say a flipper bought an apartment for 4 million rubles, made improvements to it for 500 thousand rubles, and then sold it for 6 million rubles. In this case, the amount of sales tax that he is required to pay is 780,000 rubles, which eats up a significant part of the profit. But there are a number of ways to minimize tax risks.

Method 1

If the sale price of housing is less than three million rubles, the sales tax is the same 13%, but the seller has the right to receive a tax deduction from the state in the amount of 260 thousand rubles, and the buyer - 130 thousand rubles. It is necessary that the purchase and sale be carried out within one calendar year (tax period), otherwise the parties to the agreement are not entitled to a tax deduction.

Method 2

In some cases, when the actual value of the property exceeds the legal limit, the buyer and seller agree that the agreement will indicate an amount less than three million, and the remaining money will be transferred in cash. Although this scheme is illegal, there are still people who want to save money in this way.

Method 3

According to the Tax Code of the Russian Federation, if the seller of real estate has owned it for more than three years from the date of conclusion of the contract, he is not required to pay sales tax at all.

Reselling apartments is a profitable business idea. The essence of the idea is to buy an old apartment that has not been renovated for a long time, with old wooden windows, old plumbing.

Such an apartment is much cheaper than similar renovated housing. But not every owner has the opportunity to invest money in renovations before selling the apartment.

But the apartment resale company owns such resources, let’s take a closer look:

How to organize a business resale of apartments?

The company must employ several people. It will not be possible to open such a company without initial capital. There is an option to conclude an agreement with the owner of the apartment that the company helps him with the sale at his price, while it does the repairs and resells the apartment for its own. But there are no guarantees that the person will not cheat you. According to this scheme, you can open a company without money to buy an apartment.

However, with any scheme, money is still needed for great repairs. If you buy an apartment for 1,000,000 rubles, invest 200 thousand rubles in its renovation, and sell it for 1,500,000 rubles. For a company of several people to exist comfortably, it is enough to resell 2 apartments per month.

You need to have a good sales manager on staff who will look for clients and go with them to the site, a realtor who will look for profitable options for inexpensive purchase of real estate, as well as a repair team and a designer.

It is important to carry out repairs efficiently. Some people don't like working with agencies, then the property owner can be forgiven for talking about their property in person. By the way, if the buyer wants to redo the renovation to his liking, your company’s specialists can help him.

It is important not to go into crime, not to try to deceive people who are ready to sell their apartment for next to nothing. The essence of the business is to buy an apartment without renovation, improve the home and then resell it at a profitable difference. Honest money is always harder to come by, but your conscience will be clear.

The resale of apartments can be combined with the resale of houses, although repairs will take more, because you will need to improve the territory, plant gardens, lay out paths, and deal not only with interior decoration, but also with the facade of the building.

Many wealthy Russians have recently been actively buying residential real estate to invest money for further resale. It is widely believed that you can make good money by buying an apartment during the construction stage and selling it when the house is completed and put into operation.

They say that buying an apartment at the excavation stage, i.e. when a construction organization just starts constructing a project, it can bring about 200 percent profit.

In fact, it's not that simple. This type of business has its own specifics, so it is not suitable for everyone. Firstly, to purchase even the most budget real estate, you need a serious initial investment of funds. Secondly, no one is safe from meeting with unscrupulous developers, or simply swindlers.

Moreover, even a seemingly almost completely completed house may wait several years for connection to communications and actual commissioning. Therefore, only a detailed preliminary study of the real estate market and all its pitfalls will minimize risks and ensure good earnings.

Several ways to organize a business resale of apartments

You can make money on the resale of apartments without dealing with new buildings, because there is also a secondary market. Let us give as an example several of the most common business schemes that allow you to make a profit on the secondary market:

1. We buy a “killed” apartment, we do inexpensive cosmetic repairs and sell them at a profit. In this case, the cash costs for purchasing an apartment will be significantly higher than for purchasing an apartment during the construction stage, but the risks are minimized. The main thing is to rationally approach the issue of arrangement.

Today, the market offers a lot of inexpensive building materials that have good performance characteristics. By spending a small amount of money, you can get an apartment with high-quality cosmetic renovations, which will quickly find its buyer. In this way you can earn up to 15-20% of the original cost of housing.

2. Urgent purchase of apartments. Often, due to some circumstances, owners urgently need to sell their apartment. In this case, in order to speed up the sales process, they offer the property at a price 10-15% lower than the market average. After a successful transaction, all that remains is to put the apartment up for leisurely sale at an adequate price.

3. Rooms in communal apartments. This scheme consists of a phased purchase of separate rooms located in the same communal apartment. The cost of all purchased individual rooms will be approximately 20% lower than the cost of the entire apartment. The most difficult thing here is to come to an agreement with all homeowners, which is not always possible.

Which apartments should I buy for resale?

For beginners just entering the apartment resale business, experts recommend that they first purchase only liquid apartments, that is, those that can be quickly sold. Today these are one-room or two-room apartments in the middle price category.

An apartment with a large area is more expensive, and there will be significantly fewer real buyers for it.

If the apartment is not for sale

You need to understand that an apartment is not a loaf of bread, so it is extremely rare that you can sell it in a matter of days. Sometimes you have to wait several months for an acceptable deal.

So that the apartment does not hang as a dead weight, but makes a profit, it can be rented out, warning the tenants that when a real buyer is found, they will have to vacate the living space.

For a long time, real estate has been one of the most reliable ways to protect finances. Such a guarantee cannot be expected either from money, or from gold, or from precious stones. Jewelry and precious metals are movable property and can be lost quite easily, while cash is subject to inflation and suffers as a result of monetary reforms. Housing always remains in price. And it can even serve as a tool for making profit. If you know how to make money in real estate, you can set up a very real and reliable business. Let's briefly look at its main schemes.

How it works

So, we make money by selling real estate. And not only on her. Investing in residential properties can be done on different scales and using different methods. Namely, by buying and reselling apartments, renting out premises, or opening your own intermediary business in the form of a private real estate agency. You can also buy or rent commercial premises. Other real estate (cottages) as a resale property are quoted less due to the high cost of a housing unit, but are also quite in demand.

Not all of these methods are available to everyone. Purchasing residential property or renting a commercial property requires investing very, very considerable initial funds. Such investments can be afforded mainly by commercial organizations. Among their options is obtaining a bank loan for their own project. But the real estate business, that is, making money on transactions involving the purchase and sale of real estate, is also available to an individual if he has the necessary initial capital.

What are the main risks?

The main risk of business in this area is the lack of quick payback and possible losses in connection with this. The most popular type of such investment is the purchase of housing (a separate apartment) for the purpose of further sale. In recent years, due to the crisis and falling prices in this area, the volume of investments in such transactions has noticeably decreased and amounts to no more than 15%. This is explained by the lack of increased demand, in contrast to the housing boom of the early 2000s.

Buying a home when demand for it is growing guarantees multiple earnings upon resale. This especially applies to those who managed to invest free finance in this area in the last decades of the last century. After 10-15 years, the profit in such transactions was tenfold.

Nowadays, such an effect can no longer be expected, since periods of particularly rapid growth in demand for housing (and, accordingly, prices) are not expected in the near future. Currently, the domestic market is rather in a downward phase. Only affordable housing units are significantly increasing in price. In large cities, including the capital, expensive real estate is not in great demand.

About shared construction

The best option for investment is housing in new buildings. Other real estate (“resales”) will not give such an effect. The cheapest option is to buy a house at the foundation pit stage. By purchasing an apartment in the initial phase of construction, you save about 30% of its cost. In a stable market, this is exactly the profit figure that investors can count on as quite realistic.

But one should not discount the huge mass of risks of the shared construction system. At the very early stage, their value is maximum. To reduce risks, you should choose only developers with sufficient experience and a solid reputation. Indirect, but not absolute signs of this can be the multitude of previously commissioned objects, the conduct of activities in accordance with the provisions of Federal Law No. 214 “On Equity Participation,” a system of credit relations with one of the state banks, which, as is known, choose partners carefully and carefully.

Which apartments to buy

How to make money on real estate with the amount necessary for investment? Which apartment is better to buy? If you plan to sell it in the future, choose a monolithic house. This will increase the future market value of the property. The price also depends on the degree of improvement of the surrounding area, the quality of infrastructure, the presence of necessary social facilities nearby in the form of a school, kindergarten, hospital and chain of stores, good transport links, and in Moscow - proximity to the metro and the general rating indicator of the area.

Those running their business in the capital are advised to focus on plans for the construction and expansion of the metro network. In Moscow these days, interest in real estate located outside the Moscow Ring Road has increased. The reasons are the rise in prices for such apartments when the metro line is connected to the former remote area. The cost of housing increases in such cases by 15-30%.

What you should know about real estate in the Moscow region

Housing prices are rising not only in Moscow, but also in the region. The cheapest real estate in the Moscow region is apartments in new buildings in Zelenograd. This is due to some distance of the city from the Moscow Ring Road. Moreover, this area has an infrastructure no worse than Moscow. In addition, you should pay attention to the Solntsevo districts, where it is planned to open a metro line this year, Yuzhnoye Butovo, Dmitrovsky, etc.

Another option for investing in real estate is renting it out. How to make money renting real estate? Rented housing is almost always in demand. After all, buying your own apartment is not affordable for everyone. Those planning such an option require either a vacant property (apartment) or a certain amount in the form of initial capital.

You can use this money by renting housing that fits the parameters for subsequent renting out. If you have enough money to buy an apartment that you can later rent out, consider that your business will be an inevitable success.

The result won't come soon...

But you should keep in mind that the targeted purchase of an apartment for future rent is not the fastest business. Its payback is not that great. In Moscow, buying an average-priced one-room apartment will pay for itself in about fifteen years, for a two-room apartment this period is sixteen to eighteen years, and the cost of a three-room apartment is such that you will be able to return all the funds invested in the purchase, perhaps, only after a quarter of a century.

How to make money on real estate using a mortgage? And is this possible? Contrary to the common scheme of buying an apartment with a mortgage and then renting it out, the payback of such housing does not stand up to criticism. This property requires very long payments of loan amounts with interest. The procedure takes decades. As a result, the final cost of housing is inflated by a factor of two or three. Renting out such an apartment does not bring any tangible profit; at most it covers the loan payment.

What apartments are rented?

So, you have decided to buy an apartment for rental purposes. Which is better to choose? The most popular ones are one-room apartments. They are most often chosen for rent. The requirements for the house in this case are not too high. It can be panel and not too prestigious. If you do not allow yourself to think about the future sale of such an apartment or using it for your own needs, budget housing in a five-story panel building is a good option in terms of saving initial investments. But, keeping in mind the possible prospect of sale, you should be concerned about its acceptable quality.

Most often, the ultimate prospect of such an apartment is to become the future home of the younger generation of the investor’s family. In this sense, investing in housing is a smart and promising step. By the time the child reaches adulthood, the apartment will pay for itself and increase in price many times over. By renting out housing that is not yet in demand, you will get back your initial investment and will be able to give your son or daughter an excellent valuable gift for almost free when they come of age.

If there is no money

Is it possible to start a real estate business without investing a penny of initial capital? We'll have to disappoint you - this idea is one of those unrealistic fairy tales for lovers of freebies. Even if you decide to rent out your own apartment, think about the need to bring it into decent condition. That is, costs will be required for good cosmetic repairs.

Investments will be required to search for suitable options, to pay partially or fully for housing and communal services for purchased objects, and much more. Therefore, there is nothing to do in this business without initial funds.

Is Moscow real estate a goldmine?

The capital, with its sky-high housing prices, is the most promising place in terms of such earnings for its native residents. The most common option for investing in real estate for an ordinary Muscovite is renting out your own apartment in a good area for very decent money and moving to live in rented housing in one of the cities of the Moscow region, where the cost of rent is several times lower.

Some decide to sell expensive Moscow real estate and buy cheaper ones in the Moscow region. The difference in money is invested in renting additional premises for the purpose of commercial hiring. A metropolitan apartment, in addition, can be converted into a hostel and rented out on a daily basis. As you know, prices for renting residential space at retail are incomparable with long-term rent.

Other options

How to make money on real estate when you don’t have any extra living space and don’t expect to? If at the same time you live in a two-room apartment or three-room apartment, and one room remains unoccupied, this free living space can be rented out.

Some “apartment” businessmen purposefully buy up apartments, choosing the most “dead” ones - without any repairs, often in terrible condition. As a rule, it is the former property of alcoholics and other lumpen people. The market value of such housing is somewhat lower than average, and, having forked out for decent repairs, upon subsequent sale it is possible to return the invested funds with a significant “addition”. After all, the internal condition of the apartment is the first thing a potential buyer will pay attention to. Many people purposefully look for renovated housing, because they don’t have the strength or desire to tinker with it themselves, and are ready to pay for it.

There is such a profession

How to make money in real estate from scratch? Which investment method is the least expensive? Perhaps we can talk about private real estate here. An intermediary in apartment transactions does not require initial capital, because the principle of such earnings is to receive a percentage of commission from the client for services rendered. But this business cannot be classified as easy and uncomplicated. Those who choose to become real estate agents will have to study a huge amount of information, actively move around the city, communicate with a huge number of potential clients, the search for which is more difficult for a single businessman than for a professional well-promoted agency with ample opportunities for self-promotion.

A realtor is required, in addition to dexterity and penetration abilities, to have good communication skills and psychological insight. The first results can be expected no earlier than in a year. And therefore, at first, it makes sense to carry out such activities only as an additional income - as a starting step in the development of a future business.

People who saved their ruble savings in 2014 through the purchase of real estate will soon receive an unpleasant surprise - tax innovations that will take effect in 2016. From January 1, it will be possible to sell an apartment without paying taxes only after five years (instead of three, as now). This is pushing many investors to actively go into cash now - selling their investment square meters through the assignment of rights. Managing partner of the Moscow real estate agency Dream Realty Nadezhda Telesh discusses the acquisition of such apartments

Today, the most risk-free and interesting from the point of view of medium-term (three to five years) investment is the purchase of apartments in a new building from private investors.

And there are several reasons for this:

1) the apartment rental business has dropped significantly, and considering the purchase of finished secondary real estate from this point of view is not very advisable. Judge for yourself: payback period of more than 20 years, service costs and hassle with tenants, taking into account reduced rental rates, lead to the fact that the property becomes more of a liability than an asset;

2) taking into account the fact that a significant volume of new buildings is frozen or shifted in time, investments at any stage from the foundation pit to the installation of communications in the medium term represent an increased risk and the freezing of their investments for an indefinite period. In this case, we are considering options at the excavation stage and unfinished construction.

In this regard, if we are not considering the option of solving a personal housing problem, but are relying on the investment attractiveness of the property, we recommend giving preference to secondary real estate in new buildings sold by private investors.

Reason #1: price. The price of apartments in new buildings today differs by 5-10% from the price of the developer himself. And the price for private investors is lower due to the fact that they are not tied to credit obligations and a sales plan; they are ready to fix their profits, which usually range from 50% to 70% of the initial investment.

When purchasing such objects, it is not at all necessary to invest in repairs (especially taking into account the new prices pegged to the euro and dollar).

In addition, the seller is interested in withdrawing his money without waiting for changes in tax legislation, which will come into force in 2016 and will tie the calculation of the tax base to the cadastral value of the property. And a five-year wait for a tax deduction is clearly not part of the investor’s plans.

Reason No. 2: lack of legal risks. The presence of freshly received property and keys in hand, as well as the high probability of the absence of rights of third parties to the object (which in any case should be checked) are conclusive evidence of the legal purity of the object.

The objects we are considering in three years in the same condition, namely “in concrete,” will bring their owner a profit of about 30-40%, which is at least 10% per annum. This option is ideal for a conservative investor who is ready to make a reasonable profit without incurring virtually any risks.

In any case, before buying anything, you need to analyze the growth prospects of the area, the quality of construction, the possibility of a metro, infrastructure, parking problems and several other factors, the negative consequences of the presence or absence of which can negate the entire purchase.

Nadezhda Telesh specially for RBC Real Estate