To flip or not to flip, that is the question?

Thursday, May 15, 2014

Flipping or renting out - they're Dubai's most popular real estate investment strategies. But which is the best option for you right now?

 

Property flipping or renting out

 

Flipping properties involves buying a run-down apartment or villa, renovating it and then quickly selling, or alternatively, buying off-the-plan from a developer with a down-payment and selling higher as the market inflates.

 

Flipping is all about getting in and out quickly and generating bigger profits faster, while renting your property out brings in a continual, slow cash stream over the longer term.

 

Holding and renting out a property brings you both a regular rental income as well as increases in the capital value of the property over time, which you realise when you finally sell or refinance. It’s a safe, predictable (and for some, a possibly boring) option.

 

On the other hand, many property market followers believe that flipping is an easy way to make money (using little of your own) and is the fast track to giving up their day jobs. Be careful, though - this rarely happens.

Outline Ground Realities

Competition is fierce in the Dubai property market. One recent new development opened to huge queues and even scuffles as anxious investors pushed to be first in line.

 

For flipping property in Dubai, you need deep pockets, a right approach and a quick mind.

 

There’s no substitute for clear market insights, so don’t be afraid to dig around, talk to people, consult experienced professionals. The more you know the better your chances of success.

 

Always, look at both sides of the picture. Be optimistic, but be realistic - and ready for the worst and work to a plan.

The Real Deal

Flipping property works best when you can pinpoint and buy a place at around 30% below market value. Finding these properties is tough, but, unfortunately, crucial to your success. You’ll then need plenty of cash in hand to carry out minor alterations or repairs, pay utilities and any debts – as well as insurance.

 

Then you’ll need to wait for the right buyer to come along - paying a host of outgoings while you wait. Patience and a cool head are essential.

 

Because you can never be 100% certain of your timeframe, beware of bank loans, especially if you’re buying off the plan. Try to use your own cash reserves to cover any down payments as most loans have a short payment cycle and huge markups by the financial institution. Plus you’re exposing yourself to a real financial risk.

 

The staggering rise of residential property prices in Dubai has made it tough to find suitable properties to flip. You’ll have to be ready to make an offer as soon as you spot one, so have your plan ready before you start searching.

 

An analysis of the current market reveals that the number of property sales is exceedingly higher than the number of properties available for rent. It’s definitely a seller’s market, so there are very few distressed sales on offer.

 

3Rs - The Right Place at the Right Time with the Right People

Our rule of thumb is the 3 ‘R’s. First find the right place in a great location at a sensible market price.

 

Next, aim to buy at the right time. Although timing is rarely possible as no one knows the future, many experts believe that when there’s a buying frenzy, perhaps it’s time to sell, and when the market is depressed about the future, it’s time to buy.

 

Finally, work with the right people. Everyone claims to be an expert, so align yourself with a partner who has a long track record of successful clients. You can always drop us a line at Better Homes LLC.

 

Check out our Better Homes’ Rent Price Guide for Dubai.

 

Whether you are interested in property flipping or property rentals, Better Homes LLC is ready to facilitate you 24/7. To learn more about our solutions call us on +971 600 52 2233.



Filed Under: Dubai Property

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