If you’re a real estate investor, you must have heard about flipping properties to make profits. However, beginners usually find it difficult to understand how to make profits via property flipping. But you don’t need to worry anymore, we have you covered.
What Is Property Flipping?
Some people buy property for their own use, whereas the others invest in real estate with the intention to sell it off later on. They legally purchase the property, keep it for some time, and then sell it to customers.
Experienced investors understand the market trends, which is why they buy the property at a lower price when the market slows down and sell it off at a much higher rate.
Houses or buildings that aren’t in good condition and need several repair work usually have a low market value. Investors make the most of this opportunity and buy the property at a low price. They address the damages and later sell it or rent it to tenants.
Flipping an apartment building is much different than flipping a residential house. It’s because the sale price depends on the cap rate of the property. This cap rate is calculated by dividing the net operating income of the property with its purchase price. In other words, you can say that the cap rate of an apartment complex is its annual return before deducting the debt service.
Factors to Consider
When it comes to flipping apartment buildings, you need to consider various factors to make the right decisions. There are various risk factors involved and if you don’t carefully analyze the market, you may end up losing a huge chunk of your investment.
First of all, you should consider the location of the property. If it’s located close to shopping centers, restaurant, and other facilities, you’re likely to attract many potential renters to your property.
Don’t overlook the neighborhood of the residential property. No one wants to rent an apartment in an unsafe neighborhood. So, if you really want to make profits, you should invest in the real estate property that is less risky, to begin with.
Also, consider the aesthetics of the property. Check each unit to estimate the repair costs. If the property needs a lot of repairs, you may not be able to get a good ROI.
How to Flip an Apartment Building
If you want to crack a profitable deal, you need to obtain in-depth knowledge of the real estate market. A professional real estate agent can help you make the right decisions. They have comprehensive and well-researched reports about market conditions, due to which they can indicate whether the property values are expected to go up or the real estate market is expected to crash.
Next, you should look for the properties available for sale. It’s best to go for off-market property sales because if the tenants are aware that the property is on sale, they may vacate the premises and you’ll need to look for new tenants, which is a time-consuming task. Furthermore, you can also get a good deal on a property that isn’t listed on any real estate platform.
It may take some time to find the best deal in town, so be patient. When you find a property you can invest in, you should ask for the rent-roll which consists of the number of units, tenant information, monthly rent details, and terms of the lease. Also, don’t forget to complete the legal requirements.
All in all, flipping apartment buildings can be a risky investment, but with an effective market research strategy, you can get a good return on the investment. Get in touch with an experienced local realtor to get started!