Flippers invest in undervalued properties, put them in order, beat off expenses and make their profit. As with any other type of business, resale houses have their own laws and principles. Before getting down to business, it is worth understanding the nuances and identifying possible risks.
Reasons for the appearance
Despite the presence of good assets, resale of housing in Russia as a type of business is only gaining momentum. The reason for this is the current tax system, requiring the seller to compensate the state 13% of the value of the house. The Western market became the ideological inspirer of earnings on the resale of real estate. For the first time, such operations began to be carried out in the United States.
During the global crisis of 2008, realtors realized how profitable it is to buy illiquid objects, invest in their improvement and sell after reconstruction at a good price. Systematic work has helped many agencies survive at a time when competitors fought for each client, offering standard prices and conditions. Over time, flipping as a phenomenon began to gain popularity and develop as a separate direction in working with real estate.
What does a beginner flipper need?
This business is ideal for those who want to work remotely, to travel and not become attached to limiters in the form of wages. A better start can be secured by an agent or a realtor who is already familiar with the laws of a niche and is ready to invest his potential in risky operations.
To start their own business, an entrepreneur must:
- Focus on the real estate market, determine a favorable and unfavorable price,
- Have your own investments or work with a partner who invests,
- Work out a clear plan of action and establish a sequence of work,
- Respond quickly to changes and own information,
- Build a team of reliable contractors (repairmen, advertisers, lawyers),
- Set deadlines and build a base.
It is not possible for one person to cope independently with the entire volume of tasks, therefore, the search for worthy partners or employees is a priority. Each is responsible for his own direction and is a cog in the mechanism. Please note that this type of business requires legalization.
What does a resale house scheme look like?
If you place flipping into a specific algorithm, you get the following scheme:
- Search for “trash” or an object that is sold at a low cost,
- Valuation and redemption of real estate,
- Quick tidying up of the object (cosmetic repairs, landscaping of the personal plot, installation of fences, modernization, inspection and completion of communications, etc.),
- Advertising and search for a potential buyer,
- Registration of a transaction requiring legal support,
- Tax payment
- Profit and distribution of profit, working capital for the purchase of the next home.
The presented model is quite simple, but laborious. It is important that time plays a significant role in its implementation. If the repair work drags on, the pricing policy and the timing of the benefits will change.
Where to look for objects to buy and how much can you earn?
The main task of the flipper is to get profitable objects for purchase. It can be cottages, summer residences, private houses, town houses, duplexes, plots, etc. It is desirable that all of them be located in places of increased activity, continuous construction and expansion of infrastructure. For example, in this regard, a win-win option is Moscow and the Moscow region.
The highest earnings can be obtained at:
- an undervalued asset (houses in any condition, which are located in places that will soon be built up),
- houses in a "killed" state (requiring external and internal repair, which only visually seems complicated and costly),
- collateral objects (fall into the ownership of the bank and fall sharply in price. To find them it is better to act privately and regularly review information on the websites of banking and other institutions),
- urgent sale (when the owners need money or they are preparing to move),
- problems with documents (having a good lawyer in the staff, you can find such houses and, within the framework of the law, solve problems with papers).
After registration, the masters who create an attractive house to buy out of nothing take up the matter.
How to increase market value?
Most owners do not have the time or money to put their housing in order. It is more profitable for them to sell their property without investments and not spend their time on improvements. This can be used by professionals. With a resource base and a good repair team, you can quickly transform your home.
Engage novice designers and professionals who can find building materials from direct suppliers. Remember that wholesale purchases provide additional savings. Cooperation with the same commercial contractor will give benefits in the form of priority and high-quality service of your property.
As you know, high-quality repairs do not mean expensive. You can create a style and unique interior from simple things. Pay attention to the little things. A customer can be encouraged to buy a thing that looks absolutely insignificant in your eyes.
The main thing is to apply the right combination and implement designs that will meet the tastes of customers. In America, for resale, they try to decorate the infield with planting green spaces. A painted fence and well-groomed lawn quickly lead the buyer to a positive decision.
Client Searches: Tricks and Tricks
At the stage of purchasing an object, it is already important to begin the search for a potential buyer. Timing in this matter is a priority, so many agents go to tricks and tricks. For example, they ring up people at the base, find interested people and set a minimum price tag. Then they offer the other customer a higher price, and when he agrees, they inform the first buyer that there is a person who is ready to offer a large amount. Using the method of forcing and increasing the excitement, the flipper achieves the maximum price tag, above which it is almost impossible to “jump”.
Fake buyers are invited to inspect the finished house, who, with all their looks, show interest. This is an additional incentive to make an impulsive purchase. An important role is played by correctly selected visual information and advertising in trusted sources. The advertising settings on the Internet and the search for customers can be done by an individual in the company’s staff. In some cases, you can transfer housing for sale to an agency and earn your commission.
After practicing several transactions, the flipper can expand the staff and increase the number of real estate in circulation. This will help to reach a qualitatively new level of earnings and conquer the market. In the process of optimizing the business, you need to establish partnerships, look for connections and your people who will inform about the emergence of new interesting opportunities for investment.
Flippers usually begin with one district or locality. To expand, pay attention to other regions and prospects for working abroad. Provide a solid rear in the face of lawyers and good contractors. Analyze competitors and evaluate their promotion methods. Do not be afraid to test various advertising options and resort to non-standard approaches. Thus, your business will function like a clock.
How to increase the benefits of flipping?
Initially, we talked about the fact that Russia is not so active in the sales sector due to the tax burden that rests with the seller. Specialists learned how to get around this barrier in several ways:
- Obtaining a tax deduction (if housing costs less than 3 million rubles, then you pay 13%, but you can get a deduction of up to 160 thousand rubles, and the buyer up to 260 thousand rubles),
- Ownership of real estate for more than 3 years (such owners do not pay tax when making transactions with assets),
- Unlawful, but practical reduction in actual cost (at official registration the difference is paid in cash).
As a rule, beginners work with their own working capital. This is a small amount that is invested in the object. An increase in turnover will help go beyond the usual fee.
But do not forget to make an accurate miscalculation. Your financial plan must be perfect. Consider financial risks and plan based on the worst scenario. Thus, you can get invaluable experience and good profit on real estate transactions.
How to resell a new home
You can buy an apartment in a new building not only from the developer. At the same time as the developer who is building the house, private investors, mutual funds and other legal entities can sell housing in the same house. If they offer to buy an apartment in a house not yet built, then such a transaction is called assignment of rights.
The essence of this phenomenon is that the seller and the buyer agree on the transfer of ownership of a non-existent object. Russian laws prohibit the sale of virtually unfinished real estate. Nevertheless, it is possible to buy housing in a house that has not yet been commissioned if you conclude a so-called assignment agreement or assignment of rights. In this case, the buyer assumes all the rights and obligations of the shareholder, which was originally the seller, and the seller receives money in return.
Realtors working in the primary Moscow housing market told RBC Real Estate about the pitfalls in acquiring apartments for the transfer of rights and how best to prepare for such a deal.
Why use assignment?
Assignment of rights is not the most obvious way to acquire an apartment in a new building. The vast majority of home buyers in the primary market prefers to deal directly with the developer: in Moscow, the share of such transactions exceeds 70%, the Best-Novostroy real estate agency reports citing Rosreestr data.
Second place in terms of prevalence is occupied by wholesale transactions, in which a certain company (that is, a legal entity) simultaneously buys part of the apartments from the developer. With such a wholesale, the developer can provide the legal entity with a discount, according to Best-Newbuilding. Such a mechanism is beneficial for the developer, since the developer can immediately get rid of dozens of apartments. The buyer company also finds profit: usually such firms hold the lots they have bought, in order to subsequently sell them to private individuals at a higher cost.
Directly assignment of rights occupies only 3% of the primary market of the capital, follows from the statistics of Rosreestr.
The sales structure of apartments in the primary market of Moscow in 2017
|Type of transaction||The share of the total volume of transactions on the DDU,%|
|Purchase by an individual from a developer||71%|
|Wholesale deals with a legal entity||21%|
|Wholesale transactions with an individual (more than 4 lots per 1 individual)||4%|
|Assignment from a legal entity||2%|
|Assignment from individuals||1%|
Table: “Best-Newbuilding”, Rosreestr Department for Moscow
The most popular lots, as a rule, do not go to the implementation of a new project at the start of sales - they are left for later, said Irina Dobrokhotova, chairman of the board of directors of Best-Novostroy, at RBC Real Estate. In this case, wholesale buyers due to informal relations with the developer can purchase apartments in advance, and then put them up for sale. In this case, the assignment of rights may be the only option to buy an apartment of the desired area and room in a particular residential complex.
Assignment may also be in demand if the buyer wants an apartment with not the most common characteristics and such lots have already ended with the developer. For example, in an LCD there may be only two or three offers of four-room economy class apartments. Such apartments can be bought in advance by investors, and then resold to ordinary buyers at a higher price.
“Developers themselves are often reluctant to agree to assignments so as not to create competition within the project,” warned Irina Dobrokhotova. - The price will be higher for the assignment, as the construction readiness of the facility grows, especially if the apartment was bought at the initial stage of readiness, and when the assignment is sold, they are sold closer to the moment the house is commissioned. “The developer’s commission (if it is implied for the execution of the assignment) may be included in the transfer price, especially if an assignment with special characteristics that the developer does not have on sale is offered for the transfer.”
“The main advantage of this scheme is that the assignment agreement is subject to state registration at Rosreestr,” said Natalia Kuznetsova, director general of the Bon Ton real estate agency. “From the moment of such registration, the acquirer becomes a full-fledged participant in shared construction with all the rights and obligations stipulated by the contract and Federal Law No. 214.”
Sellers who offer housing in a new building for reassignment can be divided into three groups, said Dmitry Panteleimonov, managing partner of the National Real Estate agency. “The first group is investors. These include individuals who purchase an average of one to ten apartments, legal entities whose investment volumes are measured in hundreds of millions of rubles, and closed-end investment funds (that is, closed-end mutual investment funds) specializing in real estate, ”Panteleimonov said.
“The second group is the contractors,” continued the expert. - These are legal entities that provided various services - from construction to marketing. The most common among them are construction contractors, with whom the developer partially or fully pays off square meters. The third group is individuals who bought property for themselves, for members of their family or for renting, but for various reasons decided or forced to sell it. ”
In Bon Ton Real Estate Agency, in 2017, a decrease was observed in the share of individuals who resell a previously purchased apartment. According to Natalia Kuznetsova, this is due to a decrease in profitability from investing in real estate.
“It is worth mentioning another group of investors - these are investors who purchase housing for subsequent leasing,” added Dmitry Panteleimonov. “Now the share of such investors in classic projects of economy and comfort class is minimal (less than 3%), since the rental business in our country brings an income of [total] at the level of 4-5% per annum.”
How to check an apartment
The main pitfall to which you need to pay attention is the fact that not only rights are transferred, but also obligations under participation contracts in shared construction , drew attention to the agency "Bon Ton". “If the previous participant (assignor) did not pay the full amount under the contract, then the new participant (assignee) will have to pay his debts. Therefore, it is necessary to request payment documents confirming the actual payment of the price of the participation agreement, as well as a certificate from the developer on the settlements made and on the absence of payment arrears, ”Natalia Kuznetsova recommended.
“If the assignment is between individuals, then the law allows the payment of the concession price before the state registration of the contract,” said Bon Ton’s CEO, “This creates an opportunity to“ sell ”the rights several times. Therefore, it is advisable to use a bank cell for mutual settlements. ”
It’s quite difficult, and sometimes impossible at all purchase an assignment of an apartment that was purchased with a mortgage if the buyer also has a mortgage loan, noted in "Best-Newbuilding". “But if the buyer comes with cash, it is possible,” explained Irina Dobrokhotova. “There are assignment deals when the mortgage is first paid off, and then an assignment agreement is drawn up.”
“In this case, two contracts are drawn up: first, a loan agreement between the buyer and seller. This is a simple written form: the contract is not subject to registration, it is a kind of receipt, ”added Dobrokhotova. - The buyer first transfers the money to the seller of the apartment under the loan agreement, he repays the mortgage, removes the “burden” (in new buildings, this is not actually a burden, since there is no object yet, and the stamp on the DDU is “Mortgage by law”). Thus, the apartment ceases to be mortgage and then is already reissued to the buyer (assignment of rights). When the house is put into operation, the buyer already draws up a certificate of ownership. ”
The main risk factor when buying an apartment for the transfer of rights can be called builder reliability , consider in "National Real Estate". «Вы должны быть уверены, что дом будет сдан в сроки, указанные в договоре долевого участия, — заявил Дмитрий Пантелеймонов. — Также нужно проверить факт исполнения продавцом/инвестором обязательств по оплате перед застройщиком или предыдущим собственником. Как правило, это подтверждается актом о выполнении финансовых обязательств, который подписывают застройщик и инвестор.If there are more links in the transaction chain, then for each of them it is necessary to verify the fulfillment of payment obligations. ”
“It’s also worth paying attention to how did the investor fulfill his payment obligations : by payment in cash, offsetting for work performed, a bill or otherwise, ”Panteleimonov advised. - If you are purchasing an apartment from a legal entity, request documents confirming the signatory’s authority to complete this transaction. Sometimes, in the charter of an organization, the general director does not have authority to alienate property. In the case of a closed-end mutual investment fund, such risks are minimal, since all transactions require the prior consent of a special depository or investment committee. ”
A separate factor is price issue . “When buying an apartment by assigning a claim, you get a claim for the amount indicated in the first equity agreement. It is usually much less than the price you pay to the investor. That is, in case of delay in putting the house into operation and legal disputes with the developer, the base price for calculating all fines and penalties in your favor will be the price of the contract between the developer and the first owner, not the price you paid to the investor, ”said in“ National Real Estate. "
How the market has changed
Recently, the number of apartments sold by assignment of rights has significantly decreased in Moscow and the Moscow Region, found in real estate agencies Est-a-Tet, Best-Newbuilding and National Real Estate. “Two years ago, the number of people with free money decreased, which could not but affect the demand and affect investors. The resale share decreased - up to 20% of people eventually left investment housing for their own residence, ”Valery Ruchiy, director of sales department at Est-a-Tet agency, told RBC Real Estate.
Since January 2015, private investors (i.e. individuals and small legal entities) have practically not invested in new buildings, Dmitry Panteleimonov is sure. “Large investors (legal entities and closed-end mutual funds) continue to work in the market, but the share of investments in housing has declined markedly,” the expert said. - This is especially true for the economy class of the Moscow Region. In 2017, such transactions took place only in those cases when the ratio “price / liquidity of an object / reliability of a developer” was obviously advantageous. With investments in Moscow projects, things are better, but not by much. ”
In a number of landmark projects, the yield can be much higher than for bank deposits (about 11% in some comfort class projects and up to 17% in the premium class), however, it is difficult for private investors to calculate such an object and predict what it will be at the start of sales sales, noted in "Best Newbuilding." “Many people decide to buy a new building only after making sure that the construction is being carried out dynamically, and that the object is at the stage of installation work. In this case, the assignment will not be so profitable [for sellers], ”explained Irina Dobrokhotova.
“In general, since 2015 we can talk about a long decline in the housing market,” concluded Dmitry Panteleimonov. - This trend will continue in the coming years. This is due to several reasons: the excess of supply over demand, the consequences of the demographic crisis of the nineties, as well as the upcoming renovation, which will somehow adjust the market down due to the large volumes of housing that will enter the market. "
What is more profitable: to sell the house yourself or through an agency
Over the past 10 years, so many real estate agencies have formed that it has become impossible to count them. In Moscow alone there are more than 2 thousand of them! Even a professional holiday appeared on the initiative of the Moscow Guild - the day of the realtor (December 19).
Suppose you, on the advice of acquaintances, or advertising on the Internet, choose an agency, conclude an agreement with him, and begin to wait for a buyer to be brought to you. How long will your wait be? Month? Two? Maybe six months? It will be in vain to look for terms of sale in the contract - most likely they are vague or drawn up with large legal reservations. Of course, it is possible to terminate the contract due to extended periods, but how can this be done officially if they are not spelled out in the contract? Most likely - nothing.
In addition, there is a brilliant legal trick - "the coordination of the value of the property for sale". That is, the value of your home will be determined by an allegedly independent appraiser, who is likely to be part-time employee of the agency. Such an estimated value will be clearly below market. On the question of how to independently evaluate the house before the sale, we will return.
Also, realtors can “spend the night” - that is, in addition to the commission from the seller (1-5% of the transaction amount), agencies (especially top ones) like to take a hidden commission from the buyer as well, thereby increasing the value of your property and, as a result, terms.
And - the last. Arriving at a real estate agency, you do not know who will work on your transaction, and if you find out, no one will tell you - this is an experienced specialist or an intern who will learn the art of selling at your property.
What documents are needed when selling a house
Start selling your home by preparing documents:
How to prepare a house for sale
Preparing a home can be a fascinating activity that will open in you a designer, an architect, and a jack of all trades. Make the house attractive and stand out from the rest with some unique touch. It can be a weather vane on the roof, a beautiful forged gate, a freshly painted fence, a cozy bench or a fashionable mail box near the entrance. The house and near the house should be clean and tidy.
A few simple tips:
The facade of a house ready for sale should look something like this
How to make money on reselling apartments?
Resale of apartments is gaining momentum again after the crisis. Read about how to make money on reselling apartments, which way to choose, and what skills are needed for this.
In Europe and the USA, fast reselling of real estate or “flipping” has long been popular. In Russia, this type of business is just starting to take root due to such difficulties as:
In Europe and the USA, fast reselling of real estate or “flipping” has long been popular. In Russia, this type of business is just starting to take root due to such difficulties as:
However, those who studied the topic and did not take hasty steps found liquid objects to buy, bypassing competitors and successfully earn.
How to start making money on reselling real estate
Earnings on the resale of real estate should begin with the registration of the business.
Of course, an individual can also buy apartments. Just keep in mind that too frequent transactions may alert the tax office.
In addition, you will pay more taxes (13% of the sale amount) than if you issue an IP. A tax deduction can be received only once and for a limited amount by law.
How to calculate the optimal cost of a house
Proper assessment of the house before the sale is half the success. Revaluation of your property leads to a loss of time, and underestimation deprives you of money, which, as you know, does not happen much.
There are two approaches to assessing the value of real estate:
Choosing a tax system
The most convenient option is the simplified tax system “Income minus expenses”. In this case, you will pay 15% of this difference.
As can be seen from the table, the savings are substantial. You can calmly go about your business, show customers that you are working officially and legally, evoking their trust, and you will not be afraid of fines for illegal business activities.
Most homebuyers for resale see the deal as investment.
It is assumed that you have enough money to buy an apartment. It should include the possible costs of paperwork, repairs and payment of utility bills.
Instead of buying the first apartment or house you come across, you need to analyze the real estate market in your region and city.
We conduct research
Some unscrupulous developers have so spoiled their reputation that their apartments are sold much worse, despite the location in a good area and discounts. This is especially true if you are going to buy an apartment in a house under construction.
After such an analysis, you will be able to present an approximate spread in prices for apartments of a certain level and condition, so as not to overpay for air and not lose money during the sale.
3. Buying a finished apartment with or without decoration.
If you want to make money on reselling apartments, then you can immediately dismiss the third option. It is not easy to sell a finished new apartment above the price of the developer, and this can only be done after a few years, when (and if) it rises in price.
The fact is that such an apartment will actually be sold already in the secondary market, even if you have not lived in it for a day. It is more difficult to get a mortgage for such a house, therefore it is already less attractive for buyers.
It is important to understand that even the amounts that I have cited as an example can be earned only when you are well-versed in the market.
If you consider new buildings as an object for doing business, then carefully check the developer and evaluate the liquidity of the transaction long before its implementation. Even the best apartment may not be needed by anyone if you need to get to it for three days on deer.
And immediately take aim at one-room, two-room apartments and studios, as it is much more difficult to make money on the resale of large apartments. They are more expensive, and the demand for them is lower, so the sale process may be delayed.
Despite the fact that this business is not too common in our country, there is competition in it. There are not so many profitable options for apartments, and many of them do not even get to the open market, remaining in closed realtor bases.
If access to such resources can only be obtained by real estate experts, then bankruptcy trading platforms are open to all, and you can find hundreds of options for liquid apartments on them.
By the way, competition in the bankruptcy bidding market is noticeably lower than with direct purchase of apartments for resale.
How is this possible, given the obvious benefit of buying an apartment at a price of 50-70% below the market? So far, few people know about this possibility or do not understand where such low prices come from at the auction, and you will learn about it from the video with our expert.
For more information on how tenders are organized and on the best strategies for buying apartments, houses and bankrupt cars, we talk at a free master class:
Click on the button and sign up for a free workshop to learn about the 5 steps of Dr. Watson's Formula, how to buy cars, apartments and houses at bankruptcy bidding at a discount of 50 - 90%!
Factors affecting the value of the house (in importance)
How to submit an effective sales ad
First, let your neighbors and friends know about your intentions - the chance of selling through a “sundress” is quite high. But the most effective way to sell a house is to place an ad on the Internet (the time for ads in newspapers has passed - do not waste your time).
An example of an ad: I will sell a house from gas silicate blocks of 2009 2 floors + attic. 1st floor: kitchen - 20 sq / m, guest bedroom - 15 sq / m, guest bathroom - 3 sq / m. 2nd floor: bedroom - 20 sq / m, children's bedroom №1 - 15 sq / m, children's bedroom №2 - 15 sq / m, bathroom with bathtub - 10 sq / m. Автономное газовое отопление, центральное водоснабжение и канализация. Асфальтированная дорога до участка. Сделан качественный ремонт, установлена итальянская сантехника. Двор выложен плиткой, посажены плодовые деревья, есть зона барбекю и баня на дровах. В собственности больше 5 лет. Собственник.
How long does it take to sell a house
So, potential buyers began to call you mixed with realtors. According to my observations, in order to find a real buyer, you will have to make 5 to 20 impressions, that is, get 10 to 50 incoming calls. Plan to spend from 2 to 6 months on the sale of a country house.
In addition, be prepared for 2 weeks (usually this period is provided for transferring the house to the new owner) to check out and leave the sold house.
The buyer is found, the price for the house is set, it remains only to properly arrange the sale of the house in Rosreestr. For both sides, this is the last and most crucial step.
Please note that when selling a house, the buyer acquires the right to use the respective land on the same conditions as the seller of real estate. This means that if the ownership of the house was registered in Rosreestr, the new owner automatically becomes a tenant under a lease on the same conditions as the old tenant - this is called universal succession.
What taxes on the sale of a house will have to pay
The tax legislation of the Russian Federation provides for the payment of income tax for the sale of real estate by individuals who have owned it for less than 5 years - 13% of the value specified in the contract.
Self-sale of a house is not only profitable, but also useful. Once passing this "path" you will forever consolidate the skills of the seller, which you will definitely need when buying and selling any other real estate. And the last tip: