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Property flipping in Dubai: High returns or hidden risks?

We analyse the financial advantages, explore potential drawbacks, and provide expert guidance for maximising returns through strategic flipping techniques

Property flipping in Dubai: High returns or hidden risks?

Dubai is one of the hottest spots for investment and relocation. Every year, more and more people are drawn to buying property in Dubai. According to the Dubai Statistics Centre, in 2023, there were more than 133,000 property transactions, marking a 38% increase compared to 2022 and setting a new all-time high for the market.

For investors, Dubai real estate could be the perfect opportunity to quickly boost their income. Flipping hasn’t yet gained widespread popularity in this city, making it an ideal method. This involves purchasing property to renovate and reselling it as swiftly as possible to maximise profits.

Pros and cons of real estate flipping

Real estate flipping is a strategy where the key is buying a property at a low price, doing repairs at an affordable cost, and selling it for a profit.

When following this investment strategy, it’s important to consider that renovation costs will be higher compared to purchasing a property for personal use or rental purposes. The reason is that flipping involves selecting properties in poor condition, which are sold significantly below market value. For example, renovation costs for a 1-bedroom unit in a flipping project can range from $30,000 to $40,000, whereas preparing a 1-bedroom apartment purchased in good condition for rental typically costs $9,000 to $10,000.

However, investors in flipping projects can earn net profits ranging from 16% to 25% in just six months.

Moreover, choosing the right property and carrying out successful repairs can lead to significant profits upon resale. If a property takes longer to sell, renting it out can be an option. This allows for different strategies and provides additional sources of income.

The main downside of flipping is that investors can accidentally buy a bad property that takes a long time to sell or sells for very little. But the upside is, that it’s still an apartment in Dubai—you won’t lose your investment anyway. With flipping some investors might not make a lot of profit, or any at all, but at least they won’t lose money.

“Probably the biggest plus is the return on investment, which is higher than simply renting out the apartment in Dubai. If we just buy a flat and rent it out for a year, the annual yield is usually around 8 to 12%. With flipping, the yield is higher, and the time to profit is significantly shorter. So, we typically achieve the same yield in just five-six months,” noted Vyacheslav Kuznetsov, Head of Sales at Colife, a UAE-based rental, investment, property management, and proptech company.

A ‘real life’ case study

In June 2023, an investor tasked Colife Dubai with buying a property in The Greens area and flipping it for a profit. The team chose a 1-bedroom unit in Al Arta 2 tower and transformed it into a stylish family apartment within three months. The total expenses for the project were $292,442, but the investor sold it to a buyer for $325,910, resulting in a 37% increase in the property’s value.

How to maximise profits from flipping?

Property flipping in Dubai is gaining popularity, mainly because many towers in mature neighbourhoods have outdated apartments. It’s the perfect time to snatch them up at a bargain, give them a stylish makeover, and sell them for a higher price with attractive visuals.

To maximise profits with flipping, you need to find a cheap apartment in Dubai in very poor condition but located in a popular area, renovate it entirely, and then sell it. Investors can earn even more by renting out this apartment for the short term during the selling process.

“The demand for flipping exceeds the supply in the current market. Again, this is because not every company can afford to assist clients with flipping, and even fewer companies can do it well. First, you need to find properties that are selling below market value, then you need to carry out a significant amount of design and renovation work. Not all companies have good designers and their repair team,” explains Vyacheslav.

Flipping properties is a rising investment strategy in Dubai’s real estate market. Despite requiring larger initial investments compared to buying properties for rental income, successful flipping projects can yield much higher profits in a short period. However, achieving significant gains in flipping requires careful planning, market understanding, and efficient execution of renovations.