Flipping Condominium Units: Is It Worth It?

Flipping real estate properties, or in this specific blog post, condominium units, may seem lucrative at first glance but it isn’t without challenges.

When people talk about flipping real estate, two things come to mind. The first is where one buys a lot, or a house and lot, and builds or renovates the property for selling at a higher price. The second one, which is the more popular and “affordable” one, is where one buys a pre-selling condominium unit and sells the unit before turn-over.

Now, one of my best friends sent me a message a short while ago to ask about flipping condominium units. Since I do have some form of experience in real estate, she thought that I was a good person to talk to. Here are some of the things we discussed…

How Are Condominium Units “Flipped”?

A brief outline of how this is done is as follows:

1. Buyer buys a condominium unit in the pre-selling stage. The earlier the development is in the pre-selling stage, the cheaper the unit will be, thus a higher ROI. This also gives the buyer a longer time period or leeway to sell the unit.
2. Buyer pays the unit depending on the chosen payment scheme. Buyers with the goal of flipping condo units usually choose the 20-80% payment scheme where 20% is the down payment and 80% is the balance. The down payment is then stretched over a period of time which becomes the monthly amortization that has to be paid. The 80% balance is then paid at the end of the payment term. 
   Note: As a “flipper”, your goal is to pay as little monthly amortization as possible. This can be done by discussing the different payment terms with your agent.
3. Buyer attempts to sell the unit before the balance due date. Here is where the risk will appear. Unless the buyer is able to sell the unit, he/she will have to shoulder the balance either in cash or through a bank loan.

What Are the Things To Consider?

• There are a lot of factors which will determine whether your investment will pay of or not. First, the location must be good. The price of properties in the CBD, while more expensive, usually increase faster. Properties where future developments will rise are also good candidates for purchase. These developments include airports, highways,  or corporate buildings, etc. Second, the developer must be reputable. Aside from a having a good track record, the quality of the property is also essential. Lastly, the unit type must be reasonable. It’s easier to sell studio or 1-bedroom units compared to bigger cuts. Some buyers also prefer to have a parking slot in tandem so that’s another consideration.
• Given the pandemic, a lot of units are already on sale in the secondary market. The secondary market is what we usually call the units that are being “flipped”. Aside from that, developers have also responded to the pandemic by providing longer payment terms, even as long as 10 years! 
• Be wary of agents who are persistent in selling units to you and making things seem lucrative, even if they are your friends! At the end of the day, their goal is to sell and not to make you rich.
• If you are really decided to do this, make sure you are financially ready or at the very least, credit worthy. Maybe even inform dad and mom bank of this!

P.S., check out how you can buy an entire SMDC unit with your credit card here!