Back in the day, the way to make money was to do a flip. This meant buying a property that needed renovations for cheaper due to the fact that it needed work, renovating it and selling it for a higher price. Through this, you’d make a nice amount of money. Well, those days are pretty much over due to the following factors:
- Even fix-it-up properties are being sold at high prices due to the lack of properties on the market and a high-demand.
- Taxes- when you buy a property, and assuming this is not your only property, you’re paying 8% o the first dollar. If you choose then to sell the property within less than two years (which is what you would want to do in a flip), you’re paying 25% capital gains tax.
- Sometimes the renovations are not the buyer’s taste, and therefore, either the buyer has to redo the part/whole of the property or sell it at a lower price in order to accommodate that the buyer will have to redo it to their taste and needs.
Putting all these factors together, the conclusion is that at this point, the place and properties to buy are those that are on paper. Why is that? Everything is brand new, you get it with high-specs, usually with central a/c and heating built in, including underfloor heating, and more. This doesn’t even include all the amenities that you get, such as, elevator (usually shabbat), storage, private parking, etc. Since you buy it from a company, you’re getting for market value or even cheaper, because they need to sell and they don’t have the greed that private sellers have nowadays. In addition, the payment terms are much convenient and reasonable, for example, 20%-30% at signing and 70%-80% person upon completion of the building, which usually, by the time you receive the property the property is already worth 15-20% more than when you signed.
The only downside is that the cost of the building index might go up over the course of the building being constructed. Even taking this into consideration, I have yet to find people who purchased on-paper and didn’t benefit from the money they made after they decided to sell or save money on buying on-paper.
Bottom-line, nowadays, in my humble opinion, it seems like, the best deals that are out there are the deals that are on-paper.
