India is the land of opportunity when it comes to real estate. If the 2008 recession had not affected the property market, then it would have been at its peak now. During the slowdown period and in fact afterwards, buyers, sellers and developers came up with various strategies to deal with it.
There are many from the industry who believe that property flipping is unethical and not a correct way to deal with assets. Ashok Gupta, CMD, Ajnara India Ltd. points out “There is nothing unethical in flipping properties as far as the sector is concerned but then there are certain limitations to it as far as the Indian market is concerned. Flipping real estate properties involves investors and the current market is dominated by end users. In such a scenario, finding a good investor ready to invest in the idle property can be a big challenge.”
Property flipping is primarily used to define buying of a revenue generating property and then re-selling it to earn profits. It is basically rebuilding and upgradation of an abandoned property to give a restored look for potential buyers.
There are two major things that a buyer should keep in mind while buying the property – one is to make sure of getting a decent discount and secondly be completely ready to close the deal fast. A seller will be in a hurry to sell the property quickly, as he is already giving the buyer good amount of discount with an expectation of closing the deal swiftly.
For several investors, property-flipping is a shortcut to financial gains. Thorough research and good experience in real estate sector can determine a successful move.
It is very important to understand the current market condition. Though, it may seem very easy to deal with property flipping, it is highly influenced by many factors.
Major benefits of flipping real estate
- Property flipping tends to help a seller who wants immediate monetary gain and have the adequate funds to carry out necessary repair works and make the house presentable that can attract potential buyers.
- It is not the seller; a buyer earns the maximum profit. The major capital gain happens while buying a flipping property. Though the buyers need to take care of the renovation costs as it may give a momentary financial burden but he should understand the profit perspective too, which he will get while re-selling it in a short span of time.
- It is important to understand the difference between the discounted price offered by the seller and the price raised after all the renovations to present a fully furnished house to the buyers. In flipping real estate, the difference created is the actual profit.
- One needs to apply the correct strategies for a successful property flipping. In property market, you can always find a seller, who is in a hurry to sell their property as early as possible. A buyer can approach such kind of sellers for flipping real estate. These properties at all times come on a discounted price which can prove highly beneficial.
- It is not necessary to get huge profit on every property flipping. A seller needs to be consistent on every deal to make the property flipping a success.
If we talk about the benefits, one should always consider the negative side too. While calculating the finances and other aspects of flipping a house, certain things can turn it into a bad deal. Things like over budgeting, reselling it with a price lower than what you are expecting after all the renovation work are examples. The property market could also be stagnant for a prolonged period. These are the few worst-case scenarios one should keep in mind while looking to flip.