Seven Ways to Flip a Property"Flipping" is the buzzword of the year in real estate - flipping books, flipping articles in the newspaper, and even flipping shows on TV! What is flipping, how does it work and how you can profit?
The danger in fix and flips is either paying too much or underestimating
repairs. Be very conservative in your fix-up costs and length
of time it may take to resell. Also, make sure you include in
your
analysis the cost of paying a real estate agent to sell the property. Flip Strategy #2: Buy, Refi & Lease/Option Rather than sell the fixed up property for all cash, sell for
terms. Once you have completed the rehab, refinance the property
at its
new appraised value. If you did the math correctly, you should
have little or no money in the deal. Sell the property on a lease
with
option to buy. The rent payment from your tenant/buyer should
cover your mortgage payment (if not, consider an interest-only
or adjustable
rate loan that is fixed for 3 years). When your tenant exercises
his option to purchase, you reap a larger profit, since you don't
have to pay a broker's fee. If the tenant exercises his option
after 12 months, you benefit from a lower capital gains tax rate. Flip Strategy #3: Buy & Flip "As Is" Don't like to do fix-up work? Consider selling the property "as
is" as a light fixer upper. If the local real estate market
is hot, you should be able to sell the property in poor condition
just a little below market. This is especially the case with houses
in "transitioning" neighborhoods. Make sure, of course,
that you acquire the property sufficiently cheap enough that
you can sell it below market quickly and still profit. Flip Strategy #4: Wholesale Strategy #1, the fix and flip, is very popular, which means there
are a lot of investors looking for rehabs. You can buy the property
cheap and sell it for just a few thousand dollars more to another
investor without doing any work. You won't make nearly as much
as the rehabber, but you will realize your profit quickly. Flip Strategy #5: Pre-Construction In very hot real estate markets, prices are appreciating as much
as 2% per month. If you time things right, you can put a contract
on a pre-construction house or condominium, then flip it to someone
else when the development is complete. If it takes 12 months
for the development to be complete, and the condo price is $500,000,
you could make $100,000 or more in one year! Of course, the opposite
is also true - you could end up losing money if the local economy
tanks and you end up with a worthless condo that you can't sell
for more than you paid. Use this approach very carefully... Flip Strategy #6: Scouting The Scout is an information gatherer, so not technically a property
flipper. He is the "bird dog" who finds potential
deals and sells the information to other investors. Many
people get
started as a Scout for other investors because it does not
take any cash
or prior knowledge to look for distressed properties. The
Scout finds a property for sale, gathers the necessary information,
and then
provides this information to investors for a fee. The fee
will
vary depending on the price of the property and the profit
potential. The Scout can expect to make five hundred to one
thousand dollars
each time he provides information that leads to a purchase
by another
investor. Flip Strategy #7: Illegal Flipping OK, I am not advocating this approach, because it is illegal.
Illegal property-flipping schemes work as follows: unscrupulous
investors
buy cheap, run-down properties in mostly low-income neighborhoods.
They do shoddy renovations to the properties and sell them to
unsophisticated buyers at inflated prices. In most cases, the
investor, appraiser
and mortgage broker conspire by submitting fraudulent loan documents
and a bogus appraisal. The end result is a buyer that paid too
much for a house and cannot afford the loan. Since many of these
loans
are federally insured, the government authorities have investigated
this practice and arrested many of the parties involved. As a
result, the public perceives is flipping to be illegal.
http://www.legalwiz.com/articles/ |
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