Expert: Real Estate Market Favors Flippers Over Investors

According to Igor Habal, a board member of Uus Maa, Estonia's largest real estate agency, flipping is currently booming – that is, renovating apartments in poor condition for sale – which means that cheaper offerings will soon run out and demand and prices for apartments requiring repairs will rise.

"During difficult times, flippers are very active – it's become a new national sport instead of investing in rental apartments. They buy an apartment in poor condition and renovate it for sale – essentially being both builder and investor in one. The market also favors flippers because construction material prices haven't risen – a fresh renovation can be done with affordable investment," said Habal.

"The most profitable is to change the apartment's layout and number of rooms – if a one-bedroom becomes a two-bedroom or a two-bedroom becomes a three-bedroom, the apartment's value increases significantly. For flipping, they mostly search for dormitory apartments under 100,000 euros. If you invest 500 euros per square meter in renovation, you can, for example, earn 10–20,000 euros from a 2-room apartment, or more than 10% total return on the apartment. The entire process takes 3-4 months, so it's possible to repeat it three or four times a year with the same capital. A classical rental investor can only dream of such returns today," said Habal.

According to the board member of Uus Maa, investing in rental apartments is at a low – loans have become more expensive, rents haven't risen much, and you'll likely have to pay extra out of pocket every month. "However, apartments are also flipped for renting out – if you turn a one-bedroom into a two-bedroom, for example, you can ask six to 150 euros more per month for it. Since flipping is becoming increasingly common, even small construction companies on the building market don't see a shortage of work these days," added Habal.

"Flippers first look at the price and where the market is liquid and there are the most buyers – mostly in Tallinn's city center and dormitory areas. In some dormitory areas, such as Mustamäe, there are few new apartments, which means their average price per square meter is quite high – around 4,400-4,500 euros. Many people can't afford it and look for older, but well-maintained apartments instead," said Habal.

"The flipping market isn't only active in Tallinn, but also elsewhere in Estonia – especially in small towns with good infrastructure and connections, where sales are more active. In some cities, however, an oversupply of flipped apartments has emerged, for example, in Tapa there is currently more supply than demand. In rural areas, so to speak, flipping isn't very financially rational because construction is more expensive and the potential market is limited," added Habal.