The new trend of development is called the trendy word flipping – from the English verb to flip, which means “to turn over”. In simple words, the original meaning of the word means “rapid change”. In Chisinau, flipping is subjected both to housing from the old stock and in new houses.
According to the director of real estate agency Nika Imobil Petru Oleinic, it all started in 2019-2020, when the Prima Casa housing soft loan program grew in popularity. There appeared clients who did not have the opportunity to buy an apartment with a mortgage, and then still take a loan for repairs and household appliances and in parallel to pay rent. It is for them that the market has formed such a program, when you can buy housing ready for move-in and take care of nothing else, and quietly repay the loan.
“It is the development of mortgages that has influenced the fact that there is a demand for ready apartments with repairs. Because before, when an apartment was bought at the expense of their own resources, in new buildings preferred to do the repairs themselves. Someone saw it as an opportunity to save money, and someone – to realize their own design ideas. It was believed that repairs made for sale could not be of high quality,” says Petru Oleinic. – Today, the generation of buyers has changed, and there is a shortage of craftsmen. In addition, the estimate for repairs done by our own forces is often 20% more expensive.
Flipping activity decreased somewhat due to the pandemic, then with the military operation in a neighboring country, when mortgage rates rose to 18%. And when the rates went down, this market revived again.
Moldovan builders and mid-level specialists who had worked on construction sites abroad for several years initially started to engage in the business of repairing and reselling apartments. When they had to return home for one reason or another, it turned out that it was possible to earn approximately the same money at home.
They have established relationships with manufacturers of building materials and furniture, and through bulk purchases and discounts they reduce the cost of repairs.
Flippers usually invest their own money in the purchase of an apartment, without resorting to credit, as this later complicates the sale procedure. But if their own funds are not enough, they work in partnership with investors, who assume all the costs, and the profit is shared according to the contract.
If flippers work as individuals, they pay tax as individuals. That is, 12% on half of the amount of capital gains (the difference between the purchase and sale price of the apartment).
“This business is profitable to engage in a growing market, because you can make money on repairs, and on the growth of prices of real estate itself, – says Petru Oleinic. – And when the market is stagnant, the profitability is reduced, and the benefit is only repair work. According to my calculations, the profitability of one operation (i.e. buying an apartment, repair and sale) can be up to 10%. The main thing in this business is turnover, which averages 3-4 months”.
The company New Casa specializes in the repair and resale of mainly secondary market apartments. As a rule, attracting an investor as a partner.
As New Casa project manager Mykola Motsok noted for Logos Press, absolutely every element in the chain – buying an apartment, renovation and subsequent sale – is important. And at each stage it is important to comply with internal quality standards. “If you do everything right, but the repair is of poor quality, or an unsuccessful object is purchased, the whole chain will suffer. The object will not be in line with the market and will not meet the expectations of the client who pays for all this. Accordingly, this project will not be interesting for the investor and not profitable for us from the business point of view. That is why we cannot afford to make mistakes at any stage”.
The company undertakes the search for a suitable object, legal assessment, “cleaning” of the apartment from possible risks, quality repair work up to the interior decoration, furnishing and interior arrangement. This is followed by the execution of documents at the notary and cadastre certificates.
Choosing flipping apartments on the secondary market has a number of advantages, says Mykola Motsok.
“In the secondary market there are no risks of late commissioning. We specialize in quick transactions, very selective approach to the choice of apartments and reduce legal risks due to the fact that the houses are known, everything is transparent, you can always with the owner to look at the cadastre data and make sure of the purity of the transaction. That is why such apartments are well suited for Prima Casa’s credit lines.
If an investor is interested in cooperation on a particular object, the company’s specialists can always determine the condition of the apartment on site, estimate the scope of work and the cost of renovation. At the same time, investment risks are reduced, as it is possible to calculate the costs and expected profit after the deal is finalized more clearly.
It takes the company an average of three months for a good quality renovation.
“We have our own contractors, a well-tested technological process, the whole chain is present – from the designer’s work to garbage removal, realtor and notary services at the conclusion of the deal. Therefore, it is possible to reduce the timeframe,” says Nikolay Motsok.
The cost of time to buy an apartment and the subsequent sale depends on the specific object. There are more expensive apartments (three-four-room), the demand for them is less, respectively, the sale period is somewhat longer. And one or two-room apartments cost less, they are more liquid, in good demand, sold faster. And it is easier to get a Prima Casa loan for such apartments.
Payment of taxes is made in two formats. If the company works on the basis of attracted funds through an investor, the investor registers the apartment and pays capital gains tax. If the company’s own funds are invested, there are such projects, the tax is paid according to accounting documents.
In Chisinau, the starting capital for entering this business, according to experts, should be at least 100 thousand euros.
In this business, as in any other, there is demand, supply, product and risks. The product is real estate, for which there is a circle of consumers based on the use of credit mechanisms. But there are also investor risks that need to be taken into account.
