COMMON TYPES OF PURCHASE
BUY-TO-LET
This is where an investor buys a property either off-plan or completed. The property is retained and rented out on an annual basis. The investor is buying the property both for a reasonable rental yield and long-term capital growth.
BUY-TO-SIT
This is where an investor buys a property again either off-plan or completed. The investor’s aim is not to rent the property but to keep it empty and gain long-term capital appreciation. Investors who do this sort of purchase do not let the property, as the rental yields are too low.
BUY-TO-SELL (Flip Sale)
The investor buys real estate off-plan with the intention of early resale for large profits. Investors normally when buying off-plan with a two-year delivery date will “flip” their property between 9 and 24 months. Internationally, real estate, like any other commodity, is bought and sold every day of the week. Flipping real estate is a great way to make a lot of money in a short period of time providing that you are in a growth market. An investor can purchase a unit for 50% down. The unit is then placed in the developer resale pool. It is sold before the investor completes his purchase. Therefore no property tax or associated fees are incurred.
Example - Purchase Price of Apartment £25,000.00
Investor 50% Deposit £12,500.00
No monthly Payments
Price of Unit on estimated value upon
Completion after 2 years (assuming growth
Rate of 25% p.a.) £37,500.00
Therefore a profit of £12,500 on an investment of £12,500 is equivalent to a 100% gross return by completion date. This is a win-win situation both for the investor and the developer. It is an illustrative example only and should not be construed on representing any actual result or presumed actual result. Of course, it is needless to say the longer the investor holds, the greater are his profits. Normally investors who buy for flipping have to be prepared to complete the purchase as a safety margin.
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