Basic knowledge for investing in real estate: flipping or long-term rent?

Considering real estate investment, let's turn to the main choice: whether to choose the path of Flipping, which means resale, or long-term leasing? Let's delve into these concepts.

Flipping — capital increase

Flipping in the context of real estate is an investment strategy where an investor purchases property with the intention of quick resale (reselling before completion of construction or reconstruction) for profit. The main idea is to buy the property at a lower price, invest in its improvement or completion of construction, and sell it at a higher price at an early stage or after project completion.

Investors opting for the flipping strategy typically do so to quickly increase their capital and move on to a new project. Successful flippers must effectively assess the market, identify properties with potential, and timely complete projects to maximize profits.

In other words, flipping is capitalization, i.e., increasing your capital when you invest at the zero cycle of property development and resell when 50% is built or 100%. In such a case, you are only increasing your capital.

Leasing — receiving passive income

A longer-term option for earning from real estate is to acquire property and lease it for the long term. This can be done in two ways: independently or with the help of a property management company.

Some choose long-term leasing under the management of a property management company, which can provide a profit of 8 to 20%. However, it is important to remember that such companies typically take 20 to 35% of the value depending on the location.

The main responsibilities of a property management company may include:

• Finding an investor or tenant
• Contract negotiation
• Administration of the contract
• Technical maintenance
• Owner consultation
• Conflict resolution
• Marketing and advertising
• Financial reporting

These functions may vary depending on specific conditions and agreements between the owner and the property management company.

If a property owner decides to lease it independently, without involving an agency or property management company, it is essential to consider several key aspects:

• Understanding local legislation
• Preparing a proper lease agreement
• Determining the market price
• Preparing the property
• Conducting thorough tenant selection
• Organizing maintenance
• Communicating with the tenant
• Monitoring market trends

Independent leasing can be successful if you are well-prepared and study all aspects of the rental market.

Then what to choose?

If there is an opportunity to invest in the primary market, wait, and then lease after construction completion for maximum profit – this is an ideal choice. It not only allows you to increase capital but also ensures a consistent passive income.

If you need consultation, we are ready not only to develop a plan but also to help choose a country for maximum profit.

More about this is explained by Svitlana Shvydka on the ISIA Company YouTube channel and on Instagram.

English subtitles are available for this video. Enjoy the viewing!