Raid & Co: Apartment Flippers Are Not Afraid of Price Drops

A new industry has taken a firm foothold in the Estonian residential real estate market – apartment flipping. Flippers buy apartments in poor condition, renovate them, and sell them at a profit. The activation of flippers shows that at least one segment of society is confident about positive future developments in the residential real estate market and is not afraid of price declines, according to Andree Raid, director of the real estate agency Raid & Ko.

"In so-called good times on the real estate market, every property becomes a commodity. In more difficult times, which we have seen over the past couple of years, homebuyers' preferences shift towards better quality. Poor quality properties are set aside when there is a wide selection available. This has created a business opportunity for flippers," commented Andree Raid.

There have been many experimenters trying their hand at whether they can manage apartment renovation and subsequent resale. In addition, among those active in the field, there are already quite notable professionals with significant operating history and property portfolios, whose quality can be relied upon.

"Experienced flippers are able to organize apartment renovations significantly faster, at a better price, and with better quality than an enthusiast encountering renovation for the first time. A renovated quality apartment will likely get a more favorable loan offer, the apartment building will gain one good apartment and a motivated apartment owner. Everyone involved in this game only wins," assessed Andree Raid.

A professional flipper knows more or less exactly how much a typical apartment renovation costs.

"This has created interesting situations where flippers make price offers on typical apartments without even visiting the apartment in person. They know what it costs to strip the apartment to the bare walls and then renovate it. Thus, no other minor details matter when making a business purchase decision. It is not at all unusual for flippers to enter into bidding wars among themselves," described Andree Raid.

The activation of flippers is, among other things, a positive indicator regarding residential real estate market trends and forecasts.

"The activation of professional flippers, that is, active making of purchase offers, shows that at least this segment of society is positively inclined regarding residential real estate market trends, especially price movements. Flippers are hardly expecting a major price increase, but the courage to enter into transactions shows that flippers are not afraid of apartment price declines," concluded Andree Raid.