Real Estate Investing Information » Seven Ways to Flip a Property

Seven Ways to Flip a Property

Flipping Real Estate basically means buying a property and reselling it quickly, as opposed to holding on to a property extensive term as a rental. Flipping comes in numerous varieties, most of which are legal and gainful, some of which are not.

Flip Strategy #1: Buy, fix, and flip

Let's start with the most ordinary form--the good, old "fix ‘n flip." This involves buying a property that desires work, fixing it up, then selling on the "retail" market, that is, to a person who will be alive in the house.

This method is tried and right and works very well. You can simply make $15,000 to $50,000 on one deal, depending on your market and how fine you are at finding bargains.

The risk in fix and flips is either paying too much or underestimating repairs. Be very traditional in your fix-up costs and duration of time it may take to resell. Also, construct sure you consider the cost of paying a real estate agent to wholesale the property.

Flip Strategy #2: Buy, refinance, and rent option

Rather than sell the permanent up property for all cash, sell for terms. Once you have finished the rehab, refinance the property at its new appraised worth. If you did the math properly, you should have little or no cash in the deal. Sell the property on a lease with alternative to buy.

The rent imbursement from your tenant/buyer should cover your mortgage payment. (If not, think an interest-only or adjustable rate loan that is permanent for three years.)

When your tenant exercises his choice, you reap a larger income, since you don't have to disburse a broker's fee. If the occupant exercises his option after twelve months, you profit from a lower capital gains tax rate.

Flip Strategy #3: Buy and flip "as is"

Don't like to do fix-up work? Consider selling the home "as is" as a light fixer upper. If the local real estate bazaar is hot, you should be able to sell the property in unfortunate condition just a little below market.

This is particularly the case with houses in "transitioning" neighborhoods. Make sure, of course, that you obtain the property cheap enough that you can sell it below market rapidly and still profit.

Flip Strategy #4: Wholesale

Strategy #1, the fix and flip, is extremely popular, which means there are a group of investors looking for rehabs. You can buy the property contemptible and sell it for just a few thousand dollars additional to another investor without doing any work. You won't make nearly as much as the rehabber, but you will understand your profit quickly.

Flip Strategy #5: Pre-construction

In very hot real estate markets, prices are appreciating as a great deal as 2% per month. If you time things right, you can put an agreement on a pre-construction house or condominium, then flip it to somebody else when the development is complete.

If it takes 12 months for the development to be whole, and the condo price is $500,000, you could make $100,000 or additional in one year! Of course, the reverse is also true. You could end up losing money if the limited economy tanks and you end up with a worthless condo that you can't sell for extra than you paid. Use this move toward very carefully…

Flip Strategy #6: Scouting

The Scout is an information gatherer, so not strictly a property flipper. He is the "bird dog" who finds possible deals and sells the information to other investors. Many people get started as a Scout for extra investors because it does not take any cash or prior information to look for distressed properties.

The Scout finds a property for sale, gathers the essential information, and then provides this information to investors for a charge. The fee will vary depending on the cost of the property and the profit potential. The Scout can imagine making $500 to $1,000 each time he provides information that leads to a buy by another investor.

Flip Strategy #7: Illegal flipping

Okay, I am NOT advocating this move toward because it is illegal. Illegal property-flipping schemes work as follows: Unscrupulous investors buy low-priced, run-down properties in mostly low-income neighborhoods. They do careless renovations to the properties and sell them to unsophisticated buyers at exaggerated prices.

In nearly all cases, the investor, appraiser, and mortgage broker conspire by submitting fraudulent loan papers and a bogus appraisal. The end product is a buyer that paid too much for a house and cannot pay for the loan.

Since a lot of these loans are federally insured, the government authorities have investigated this practice and arrested a lot of the parties involved. As a result, the public perceives is flipping to be prohibited.

The fact is, "flipping" is NOT unlawful. Loan fraud in the procedure of flipping is what is illegal. So don't perplex the two. The further six ways to flip are very legal, very ethical, and very gainful!