Many wealthy Russians have recently been actively buying residential real estate to invest money for further resale. It is widely believed that you can make good money by buying an apartment during the construction stage and selling it when the house is completed and put into operation.
They say that buying an apartment at the excavation stage, i.e. when a construction organization just starts constructing a project, it can bring about 200 percent profit.
In fact, it's not that simple. This type of business has its own specifics, so it is not suitable for everyone. Firstly, to purchase even the most budget real estate, you need a serious initial investment of funds. Secondly, no one is safe from meeting with unscrupulous developers, or simply swindlers.
Moreover, even a seemingly almost completely completed house may wait several years for connection to communications and actual commissioning. Therefore, only a detailed preliminary study of the real estate market and all its pitfalls will minimize risks and ensure good earnings.
Several ways to organize a business resale of apartments
You can make money on the resale of apartments without dealing with new buildings, because there is also a secondary market. Let us give as an example several of the most common business schemes that allow you to make a profit on the secondary market:
1. We buy a “killed” apartment, we do inexpensive cosmetic repairs and sell them at a profit. In this case, the cash costs for purchasing an apartment will be significantly higher than for purchasing an apartment during the construction stage, but the risks are minimized. The main thing is to rationally approach the issue of arrangement.
Today, the market offers a lot of inexpensive building materials that have good performance characteristics. By spending a small amount of money, you can get an apartment with high-quality cosmetic renovations, which will quickly find its buyer. In this way you can earn up to 15-20% of the original cost of housing.
2. Urgent purchase of apartments. Often, due to some circumstances, owners urgently need to sell their apartment. In this case, in order to speed up the sales process, they offer the property at a price 10-15% lower than the market average. After a successful transaction, all that remains is to put the apartment up for leisurely sale at an adequate price.
3. Rooms in communal apartments. This scheme consists of a phased purchase of individual rooms located in the same communal apartment. The cost of all purchased individual rooms will be approximately 20% lower than the cost of the entire apartment. The most difficult thing here is to come to an agreement with all homeowners, which is not always possible.
Which apartments should I buy for resale?
For beginners just entering the apartment resale business, experts recommend that they first purchase only liquid apartments, that is, those that can be quickly sold. Today these are one-room or two-room apartments in the middle price category.
An apartment with a large area is more expensive, and there will be significantly fewer real buyers for it.
If the apartment is not for sale
You need to understand that an apartment is not a loaf of bread, so it is extremely rare that you can sell it in a matter of days. Sometimes you have to wait several months for an acceptable deal.
So that the apartment does not hang as a dead weight, but makes a profit, it can be rented out, warning the tenants that when a real buyer is found, they will have to vacate the living space.
For a long time, real estate has been one of the most reliable ways to protect finances. Such a guarantee cannot be expected either from money, or from gold, or from precious stones. Jewelry and precious metals are movable property and can be lost quite easily, while cash is subject to inflation and suffers as a result of monetary reforms. Housing always remains in price. And it can even serve as a tool for making profit. If you know how to make money in real estate, you can set up a very real and reliable business. Let's briefly look at its main schemes.
How it works
So, we make money by selling real estate. And not only on her. Investing in residential properties can be done on different scales and using different methods. Namely, by buying and reselling apartments, renting out premises, or opening your own intermediary business in the form of a private real estate agency. You can also buy or rent commercial premises. Other real estate (cottages) as a resale property are quoted less due to the high cost of a housing unit, but are also quite in demand.
Not all of these methods are available to everyone. Purchasing residential property or renting a commercial property requires investing very, very considerable initial funds. Such investments can be afforded mainly by commercial organizations. Among their options is obtaining a bank loan for their own project. But the real estate business, that is, making money on transactions involving the purchase and sale of real estate, is also available to an individual if he has the necessary initial capital.
What are the main risks?
The main risk of business in this area is the lack of quick payback and possible losses in connection with this. The most popular type of such investment is the purchase of housing (a separate apartment) for the purpose of further sale. In recent years, due to the crisis and falling prices in this area, the volume of investments in such transactions has noticeably decreased and amounts to no more than 15%. This is explained by the lack of increased demand, in contrast to the housing boom of the early 2000s.
Buying a home when demand for it is growing guarantees multiple earnings upon resale. This especially applies to those who managed to invest free finance in this area in the last decades of the last century. After 10-15 years, the profit in such transactions was tenfold.
Nowadays, such an effect can no longer be expected, since periods of particularly rapid growth in demand for housing (and, accordingly, prices) are not expected in the near future. Currently, the domestic market is rather in a downward phase. Only affordable housing units are significantly increasing in price. In large cities, including the capital, expensive real estate is not in great demand.
About shared construction
The best option for investment is housing in new buildings. Other real estate (“resales”) will not give such an effect. The cheapest option is to buy a house at the foundation pit stage. By purchasing an apartment in the initial phase of construction, you save about 30% of its cost. In a stable market, this is exactly the profit figure that investors can count on as quite realistic.
But one should not discount the huge mass of risks of the shared construction system. At the very early stage, their value is maximum. To reduce risks, you should choose only developers with sufficient experience and a solid reputation. Indirect, but not absolute signs of this can be the multitude of previously commissioned objects, the conduct of activities in accordance with the provisions of Federal Law No. 214 “On Equity Participation,” a system of credit relations with one of the state banks, which, as is known, choose partners carefully and carefully.
Which apartments to buy
How to make money on real estate with the amount necessary for investment? Which apartment is better to buy? If you plan to sell it in the future, choose a monolithic house. This will increase the future market value of the property. The price also depends on the degree of improvement of the surrounding area, the quality of infrastructure, the presence of necessary social facilities nearby in the form of a school, kindergarten, hospital and chain of stores, good transport links, and in Moscow - proximity to the metro and the general rating indicator of the area.
Those running their business in the capital are advised to focus on plans for the construction and expansion of the metro network. In Moscow these days, interest in real estate located outside the Moscow Ring Road has increased. The reasons are the rise in prices for such apartments when the metro line is connected to the former remote area. The cost of housing increases in such cases by 15-30%.
What you should know about real estate in the Moscow region
Housing prices are rising not only in Moscow, but also in the region. The cheapest real estate in the Moscow region is apartments in new buildings in Zelenograd. This is due to some distance of the city from the Moscow Ring Road. Moreover, this area has an infrastructure no worse than Moscow. In addition, you should pay attention to the Solntsevo districts, where it is planned to open a metro line this year, Yuzhnoye Butovo, Dmitrovsky, etc.
Another option for investing in real estate is renting it out. How to make money renting real estate? Rented housing is almost always in demand. After all, buying your own apartment is not affordable for everyone. Those planning such an option require either a vacant property (apartment) or a certain amount in the form of initial capital.
You can use this money by renting housing that fits the parameters for subsequent renting out. If you have enough money to buy an apartment that you can later rent out, consider that your business will be an inevitable success.
The result won't come soon...
But you should keep in mind that the targeted purchase of an apartment for future rent is not the fastest business. Its payback is not that great. In Moscow, buying an average-priced one-room apartment will pay for itself in about fifteen years, for a two-room apartment this period is sixteen to eighteen years, and the cost of a three-room apartment is such that you will be able to return all the funds invested in the purchase, perhaps, only after a quarter of a century.
How to make money on real estate using a mortgage? And is this possible? Contrary to the common scheme of buying an apartment with a mortgage and then renting it out, the payback of such housing does not stand up to criticism. This property requires very long payments of loan amounts with interest. The procedure takes decades. As a result, the final cost of housing is inflated by a factor of two or three. Renting out such an apartment does not bring any tangible profit; at most it covers the loan payment.
What apartments are rented?
So, you have decided to buy an apartment for rental purposes. Which is better to choose? The most popular ones are one-room apartments. They are most often chosen for rent. The requirements for the house in this case are not too high. It can be panel and not too prestigious. If you do not allow yourself to think about the future sale of such an apartment or using it for your own needs, budget housing in a five-story panel building is a good option in terms of saving initial investments. But, keeping in mind the possible prospect of sale, you should be concerned about its acceptable quality.
Most often, the ultimate prospect of such an apartment is to become the future home of the younger generation of the investor’s family. In this sense, investing in housing is a smart and promising step. By the time the child reaches adulthood, the apartment will pay for itself and increase in price many times over. By renting out housing that is not yet in demand, you will get back your initial investment and will be able to give your son or daughter an excellent valuable gift for almost free when they come of age.
If there is no money
Is it possible to start a real estate business without investing a penny of initial capital? We'll have to disappoint you - this idea is one of those unrealistic fairy tales for lovers of freebies. Even if you decide to rent out your own apartment, think about the need to bring it into decent condition. That is, costs will be required for good cosmetic repairs.
Investments will be required to search for suitable options, to pay partially or fully for housing and communal services for purchased objects, and much more. Therefore, there is nothing to do in this business without initial funds.
Is Moscow real estate a goldmine?
The capital, with its sky-high housing prices, is the most promising place in terms of such earnings for its native residents. The most common option for investing in real estate for an ordinary Muscovite is renting out your own apartment in a good area for very decent money and moving to live in rented housing in one of the cities of the Moscow region, where the cost of rent is several times lower.
Some decide to sell expensive Moscow real estate and buy cheaper ones in the Moscow region. The difference in money is invested in renting additional premises for the purpose of commercial hiring. A metropolitan apartment, in addition, can be converted into a hostel and rented out on a daily basis. As you know, prices for renting residential space at retail are incomparable with long-term rent.
Other options
How to make money on real estate when you don’t have any extra living space and don’t expect to? If at the same time you live in a two-room apartment or three-room apartment, and one room remains unoccupied, this free living space can be rented out.
Some “apartment” businessmen purposefully buy up apartments, choosing the most “dead” ones - without any repairs, often in terrible condition. As a rule, it is the former property of alcoholics and other lumpen people. The market value of such housing is somewhat lower than average, and, having forked out for decent repairs, upon subsequent sale it is possible to return the invested funds with a significant “addition”. After all, the internal condition of the apartment is the first thing a potential buyer will pay attention to. Many people purposefully look for renovated housing, because they don’t have the strength or desire to tinker with it themselves, and are ready to pay for it.
There is such a profession
How to make money in real estate from scratch? Which investment method is the least expensive? Perhaps we can talk about private real estate here. An intermediary in apartment transactions does not require initial capital, because the principle of such earnings is to receive a percentage of commission from the client for services rendered. But this business cannot be classified as easy and uncomplicated. Those who choose to become real estate agents will have to study a huge amount of information, actively move around the city, communicate with a huge number of potential clients, the search for which is more difficult for a single businessman than for a professional well-promoted agency with ample opportunities for self-promotion.
A realtor is required, in addition to dexterity and penetration abilities, to have good communication skills and psychological insight. The first results can be expected no earlier than in a year. And therefore, at first, it makes sense to carry out such activities only as an additional income - as a starting step in the development of a future business.
- The benefits of buying an apartment in a new building at the excavation stage
- Economy option: resale of new garages
Buying small apartments (19 - 35 sq.m.) for further resale is a good way to invest in new buildings, but as with everything, there are pitfalls.
The essence of the strategy: purchase an apartment or studio in a new building (until the house is put into operation) and resell it in a year or two. Small studios and one-room apartments they grow in price best and are more liquid than large apartments.
Time required – only three days. One day to find a suitable property, the second day to submit documents to the bank, and the third to sign the contract.
When investing in new buildings for resale during a crisis, there are several important points to remember:
- it is better to choose new buildings in the last stages of construction, because there is a possibility of unfinished construction;
- developers need to be carefully checked;
- Selling a new building on the secondary market is difficult.
A definite plus is that during times of economic downturn, the price tag for new housing is much lower. But then, when the crisis comes out, real estate wins back inflation, while money depreciates. That is, the best strategy is to buy during a crisis and sell after the crisis is over, at the peak of the price.
Now the main problem in the real estate market is that the secondary market has frozen. Legally, if you bought an apartment and a developer and then resell it (without even living there for a day), this is already resale on the secondary market. A mortgage on a secondary property is not very profitable, and many people prefer to take out new buildings at a lower interest rate. Therefore, we can consider everything investment option in new houses and apartments for rent, and then exit the deal through sale.
On the other hand, until July 1, 2018, a new building can be purchased at a very attractive price. Due to the entry into force of changes to 218-FZ and the gradual abandonment of DDU, experts expect prices in this market to increase by 20-30% in the fall of 2018. So now you can buy an apartment in a new building on the most favorable terms, and the increase in cost in 1-2 years may be, instead of the standard 30-40%, much more - 50-60%.
Imagine this:
You bought an apartment for 2,100,000 rubles.
Over 6 months, it increased in value to 2,600,000 - 2,700,000 rubles.
According to calculations, the profit will be from 500,000 rubles.
Watch a fragment of Nikolai Mrochkovsky’s seminar, where the strategy of investing in new buildings for resale is discussed in more detail:
(Fragment of the seminar – )
The benefits of buying an apartment in a new building at the excavation stage
From the moment of excavation until the sale of all apartments, real estate increases in price by about 40-50%. Therefore, even taking into account the mortgage, it is profitable to purchase real estate: we pay 7-8% on the loan, the real estate grows by 40-50% during the entire construction period (1.5-2 years). We leave the difference to ourselves.
Let's look at how the cost of a new building increases when building a house. So:
- As soon as the site is fenced off and construction begins, this is the starting price.
- They dug a pit, poured the foundation - plus 10% of the cost.
- We built the first floors - another plus 10%.
- The upper floors were completed - another plus 10%.
- We handed over the house to the state commission - another plus 10%.
- They gave out the keys - another plus 10%.
Thus, taking into account the estimate, you can calculate at what stage it is most profitable for you to join the transaction. Of course, keeping in mind both the market situation and your financial capabilities.
Assessing the potential of an apartment in a new building for resale
To correctly evaluate an object, you must first determine:
- How many rooms is more profitable to take? What size?
- What are the differences in profitability between a one-room apartment, a two-room apartment, or a three-room apartment?
- By what indicators is the liquidity of an object determined?
You can find the answer to these questions in the video " Assessing the potential of an apartment in a new building for resale».
(Fragment of the seminar – Secrets to creating cash flow and capital in real estate)
2 main rules written in the blood of unsuccessful investors when investing in new buildings:
- carefully select developers and houses, consider not only profitability, but also risks;
- explore the possibility of exiting the deal before the property is delivered (sanctions, order), and also consider a backup strategy - investing in new buildings for subsequent rental.
And don't put all your eggs in one basket. If it is possible to divide funds into several projects, do so!
Economy option: resale of new garages
You can implement a real estate resale strategy not only with new buildings, but also with garages. This is a great option if you don’t want to commit to apartments just yet. Dmitry Koretsky in Barnaul is investing in garages that are still under construction. Buys them cheap at an early stage and sells them at 2 times the price. Recently at a regular meeting of investors of the Investment Territory He just talked about his experience:
Watch the video “Killer Garage Investments”:
(Fragment of recording live meeting of investors of the Territory Investment project in Moscow)
To sum it up: there are options, and many of them. The main thing is to study the details and calculate the risks!
Resale of apartments is gaining momentum again after the crisis. Read the article about how to make money by reselling apartments, which method to choose, and what skills are needed for this.
In Europe and the USA, quick resale of real estate or “flipping” has long been popular. In Russia, this type of business is just beginning to take root due to such difficulties as:
- large investments at the start;
- high risk of not selling the property at the desired price;
- subtleties of legislation and the real estate market.
However, those who studied the topic and did not take hasty steps found liquid objects to buy, bypassing their competitors and successfully making money.
How to start making money by reselling real estate
Making money from the resale of real estate should begin with setting up a business.
Of course, an individual can also buy apartments. Just keep in mind that too frequent transactions may alert the tax office.
In addition, you will pay more taxes (13% of the sale amount) than if you register as an individual entrepreneur. A tax deduction can be obtained only once and for an amount limited by law.
Choosing a tax system
The most convenient option is the simplified taxation system “Income minus expenses”. In this case, you will pay 15% of this difference.
As can be seen from the table, the savings are significant. You will be able to calmly go about your business, show customers that you work officially and legally, earning their trust, and you will not be afraid of fines for illegal business activities.
Most buyers of resale homes view the transaction as investment.
It is assumed that you have enough money to purchase an apartment. It should include possible costs for paperwork, repairs and utility bills.
Real estate can take a long time to sell. Therefore, it’s good if it’s “free” money that you won’t need in the near future.
Instead of buying the first apartment or house you come across, you need to analyze the real estate market in your region and city.
We conduct research
- See how different properties sell based on the following indicators:
- type of structure;
- class of apartments;
- location;
- seasonality.
- Supply and demand for new buildings and secondary housing must be assessed separately.
- Assess the situation on the market for developers and real estate agencies.
Some unscrupulous developers have ruined their reputation so much that their apartments sell much worse, even despite the location in a good area and discounts. This is especially true if you are going to buy an apartment in a building under construction.
After such an analysis, you will be able to imagine the approximate spread of prices for apartments of a certain level and condition, so as not to overpay for air and not lose money when selling.
Buying an apartment in a new building for resale
Resale of real estate in new buildings can bring in an average of 500 thousand rubles per transaction. However, you need to carefully study all the pitfalls in order to get around them in time.
Let's consider purchasing options.
1. Construction at the foundation pit stage.
This is the most profitable option. After completion of construction, 40-50% of the original cost can be added to the price.
There are two main disadvantages:
- the likelihood of unfinished construction or delays during construction;
- You will have to wait a long time for the sale.
2. House under construction.
With an apartment in a building under construction, the situation is simpler: the likelihood of unfinished construction is much lower and there is less to wait. However, you earn less, about 500-600 thousand rubles, depending on the footage.
3. Buying a finished apartment with or without finishing.
If you want to make money by reselling an apartment, you can immediately discard the third option. It is not easy to sell a finished new apartment above the developer’s price, and this can only be done after a few years, when (and if) it rises in price.
The fact is that such an apartment will actually be sold on the secondary market, even if you have not lived in it for a day. It is more difficult to get a mortgage for such housing, so it is less attractive for buyers.
It is important to understand that you can earn even the amounts that I gave as an example only if you have a good understanding of the market.
If you are considering new buildings as an object for doing business, then carefully check the developer and assess the liquidity of the transaction long before its implementation. Even the best apartment may be of no use to anyone if it takes three days to get there by reindeer.
And immediately aim at one-room, two-room apartments and studios, since it is much more difficult to make money on the resale of large apartments. They are more expensive and in lower demand, so the sales process may take longer.
Despite the fact that this business is not very widespread in our country, competition exists in it. There are not many profitable options for apartments and many of them do not even make it onto the open market, remaining in closed realtor databases.
If only real estate market specialists can access such resources, then Bankruptcy trading platforms are open to everyone, and on them you can find hundreds of options for liquid apartments.
By the way, competition in the bankruptcy bidding market is noticeably lower than in the direct purchase of apartments for resale.
How is this possible, given the obvious benefits of buying an apartment at a price 50-70% below the market price? Few people yet know about this opportunity or do not understand why prices at auction are so low, and you will learn about this from the video with our expert.
Where to invest a little money?
We tell you more about how auctions work and the best strategies for purchasing bankrupt apartments, houses and cars in a free master class:
Interesting?
Purchasing secondary housing for resale
How to profitably resell an apartment purchased on the secondary market? The main thing is to evaluate the return on investment. For this, you have much more initial data at your disposal, because the apartments are located in populated areas with already formed infrastructure: transport stops, shops, kindergartens, schools and clinics.
When buying an apartment on the secondary market, also budget for the costs of possible repairs. It can be different: from cosmetic finishing and replacement of wallpaper to major restoration of housing after a fire or flood.
Contrary to the opinion that it is profitable to buy only apartments in a “come and live” condition, when buying at bankruptcy auctions, do not be afraid to consider objects that are not so obviously attractive.
With this approach, you will quickly find an apartment at auction that can be bought 2-3 times cheaper than the market value, and your markup on sale will cover the cost of repairs.
Read detailed instructions for purchasing apartments at auction in the article:
With the proceeds from the sale, the auction organizers need to pay off the debt of the bankrupt, so the auction starts with a higher price, and then it decreases. However, the liquidity of such lots may vary, so the resale of debtors' property requires a careful approach.
A significant advantage is that you not only see photographs and videos and can come to the site, but also have the opportunity to familiarize yourself with all the documents before purchasing. Therefore, you will be able to assess the liquidity of the property and clearly calculate your profit.
In this video, our analyst analyzes a basic analysis of the liquidity of an apartment 50 km from St. Petersburg, which is being sold at a bankruptcy auction:
Buy an apartment near St. Petersburg inexpensively?
To profitably resell real estate on the secondary market, you can spend days and nights first searching for a profitable option, and then finding a buyer willing to pay an inflated price.
If you purchase at a bankruptcy auction, you have an alternative - Doctor Watson's formula which is that you find a buyer for a specific lot before participating in the auction, so You risk absolutely nothing.
Earnings from renting real estate
At the start of a real estate resale business, renting apartments can become a backup option.
An apartment is a serious investment. If you first purchased an object with your own funds and then put it up for sale, then it is unknown how soon you will find a buyer; perhaps tomorrow, or maybe in six months.
During this time, the purchased apartment can be rented out to recoup the investment in its maintenance.
Renting an apartment for a long term gives a good increase in wages. Some buy several apartments and live only on this money, receiving less, but every month.
This type of business has its advantages:
- you do not need to study and constantly monitor real estate legislation;
- you do not take risks by constantly investing money in the purchase of new apartments;
- you don't have to spend a lot of money through your accounts, which means you pay less taxes.
In addition to apartments, various real estate properties are sold at bankruptcy auctions.
You can buy and rent out garages or non-residential premises, which are cheaper than apartments and are in demand among tenants. You can also rent out office or industrial buildings if you don't sell them outright.
I discuss the topic of real estate business in more detail in another blog article:
Resale of other real estate
You can buy anything for resale, including:
- office buildings and workshops;
- country houses;
- garages and parking lots;
- land;
- technical buildings.
Once I bought premises in a city bathhouse for 228,509 rubles and sold them for 300,000 rubles...
Case No. 7 purchase of a lot from bankruptcy auctions in Furmanov
As you can see, resale of real estate, along with their rental, is a promising niche for business, even if you live in a small city.
However, in order for your income to grow without you having to work 24 hours a day, you need to improve your skills and develop your investor mindset.
Property resale training
You don’t have to be an experienced realtor to buy and profitably resell debtor apartments.
At the Bankruptcy Bidding Academy, we teach students how to conduct transactions with real estate put up for auction according to all the rules:
- assess the liquidity of the object and develop a backup plan for exiting the transaction;
- competently prepare applications for participation in tenders;
- communicate with bankruptcy trustees and collect as much information as possible about the lot;
- identify unprofitable lots and act correctly in situations where the tenderer tries to evade fulfilling his duties
This allows future specialists, already at the training stage, to understand how to make money on the resale of real estate without making unnecessary mistakes and without losing their own money.
The profession of a bidding specialist does not require special education and five years of university study, however, if you are interested in entering this business and learning how to buy up any bankrupt property at a 50-70% discount, then I highly recommend that you learn the intricacies of searching for objects and participating in auctions .
Knowledge from the fields of jurisprudence, marketing, analytics and direct sales will not be superfluous for working with real estate; however, even without them you can get 100-150% profit, simply using proven technology.
A step-by-step plan and a clear algorithm for cooperation with investors will protect you from mistakes and help you quickly find buyers for your properties.
How find “golden” objects at auction, as well as a ready buyer or investor using Dr. Watson’s formula, you will find out at our master class, which I advise you to sign up for right now in this form!
Interesting?
Click on the button and sign up for a free master class to learn about the 5 steps of Dr. Watson's Formula, how to buy cars, apartments and houses at bankruptcy auctions with a 50 - 90% discount!