Estonians' National Sport is Renting and Flipping
Real estate dealing has been Estonia's national sport for some time now. While most people who have made investments deal with renting out apartments, flipping has also been gaining popularity – this is the renovation of apartments in need of repair for the purpose of sale, comments ELUM Real Estate broker Egon Juhanson.
Flipping and rental apartments are like two different worlds. While the first is a quick process, the second is long-term and the payback period is often more than ten years. The intensity of activities is also different in both cases, and each person chooses what suits their knowledge, financial capabilities, and time commitment better.
Flipping requires active market monitoring
"The main deciding factor in flipping is the price of the acquired property, and it is important to get it as cheaply as possible," explains Juhanson. "For example, with the asking prices of apartments in need of repair currently offered on portals, the project would not generate profit in its final form. Therefore, you must keep a constant eye on listings and act quickly when a favorable offer appears."
According to Juhanson, there is no fixed price per square meter for renovation work, as apartments in need of repair vary. You need to consider whether windows, exterior doors, wiring have been replaced, or how crooked the walls are.
"If you are using a bank loan, then also put together a plan B. For example, in case you don't get your desired selling price, there should also be an option to rent out the apartment," emphasizes the broker.
For rentals, yield is important
If you decide in favor of renting out an apartment, then similarly to flipping, the price at which you acquire the real estate is also extremely important here.
"You should certainly investigate the condition of the building. If the building is going to be renovated, then ask what the repair fund and other costs will be. You also need to account for natural wear and tear in the apartment itself, for example walls, floors and appliances," explains Juhanson.
