Flip, turn-around of exit deals, are different names for the same real estate investment called ‘Property Betterment’. This refers to the purchase of a property and the execution of certain actions which produce an increase in value in order to sell it at a profit.
As simple as it may sound, it comprises within such a business complexity, that ignoring it could only result in a futile effort and finishing the project without making a profit, or worse, at a loss.
At this point it is important for us to bring up the “crude” word many fail to speak of, which is money! When we enter into betterment transactions as investors, we have one primary goal, and that is to make money on the deal. We are assuming risk when we enter into the deal, and the reward for our risk is the profit at the end of the transaction.
In order to simplify things, we will divide betterment projects into two strategies:
This strategy is in fact based on the evaluation of the future of the area where the property is located together with the adjacent area. In this case, the investor is able to purchase the property at market value, however, projections and inside information in respect of future projects and urban development in the area will lead to the increase in real estate prices without any intervention and/or the making of an active investment by the investor in a medium time frame of 3-5 years.
For example: If a new neighborhood is being built near the location where the property is located, and the prices of apartments in it are significantly higher than the existing properties, it is most likely, that second hand apartments, including the property in question will increase in value, since expensive properties pull the price graph up.
Another possibility is the acquisition of property next to projects of urban renewal and development. When a municipality begins to execute betterment and development projects of neighborhoods and infrastructures (paving of new roads, building a boardwalk, running and bicycle routes), or in addition to the acquisition of properties next to urban renewal projects.
For the most part, such types of betterment may be slow, but can reach betterment levels of 30%-40% profit, in addition to the rental fees which are received during the waiting period. Another example for land betterment is the change of designation and executing percelization of the land. The acquisition of land reserves, usually in a size of between 4-8 Dunams in sought after areas, and dividing the plot to sub-plots at the Land Registry Office. This move will immediately increase the value of the property since now you will be able to build additional housing units on the land you own, or alternatively to sell the plot with a building permit to the next investor. This process will require minimum active intervention on your part, since most of the paperwork and the submission of documents will be performed by the company’s attorneys.
In this strategy, the investor has a direct impact on the increase in property value, following the actions he is taking. This betterment begins in fact with locating the property and characterizing its needs. The company locates for the investor a property at a price which is lower than its true market value. Thanks to the company’s vast network of connections, we know how to arrive first at all the opportunities offered in the local market such as: receivers, inheritance disputes, abandoned property, property sold due to the dissolution of a marriage or business disputes and alike.
On the surface is sounds like the execution of a betterment is a trivial matter, but the reality is completely different. Inexperienced people have the tendency to be overly optimistic, for example, in the passive strategy they tend to exaggerate the increase in property value.
In the active strategy many investors get the renovation considerations wrong, they renovate the property as if they plan to live in it, trying to realize their desires in respect of the appearance of the apartment which creates a deviation from the renovation budget. Any deviation from the renovation budget “gets even” at the profit margin. A renovated apartment has to show the maximum effect with minimum effort, which means to achieve the maximum ‘wow’ effect at a minimum budget.
Precisely for this purpose our company established a property betterment department which encompasses all the professionals who are vital for the execution of the betterment process at minimum risk and maximum profit.
Our company employs construction engineers, architects, interior designers and first rate local contractors who work according to meticulous planning and highly detailed specifications that are characterized and adapted to every property and investor, in order to maximize the profitability of the transaction.
Cosmetic upgrade of the property
In many cases it is possible to settle for a cosmetic upgrade of the property prior to selling or leasing. The “cosmetic upgrade” category is comprised of a variety of renovation actions at different levels of complexity, among which are the painting of walls, replacing doors, windows and shutters, replacing kitchen cabinets, adding electrical outlets and sockets, installing lighting fixture and more. The general improvement of the apartment’s appearance and presenting it to buyers when it’s clean and pleasant will also contribute to the attractiveness of the property in the eyes of potential buyers and lessees.
It all begins with the characterization of the property. Sometimes there are assets in which a cosmetic upgrade will not be helpful, and therefore we will elect to undergo an overall and thorough renovation from A-Z. Such a renovation will usually include taking down walls, widening openings and windows, replacing the flooring, bathroom, upgrading the kitchen, the bedrooms as well as the rest of the house. An overall renovation requires comprehensive architectural planning and broad thinking in respect of the final design aspect we wish to achieve.
Building extensions with a permit
Is one of the most effective ways to improve a property. Building extensions can include an addition of a room, building a balcony or building on the roof. These additions increase the square footage of the property, and by that increase the value of the property and on many occasions also contribute to the increased demand for it.
Landscape architecture and environmental development
In addition to the expansion of the home and renovating it, it is also most important to invest in upgrading the appearance of the external space, whether the roof, the yard or the balconies. Among other things it is possible to upgrade these spaces by cultivating the garden and planting plants, organizing an irrigation system, arranging lighting infrastructures, building a deck, installing a pergola, swimming pool and more. Over the years we have gained a great deal of experience in renovating a variety of properties, starting with apartments, single dwelling homes, villas and up to hotels and office buildings. Our company has made strict standards of professionalism and credibility its motto, and by that creating peaceful dealings and maximized profits for the investor.
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