Sometimes you may sign up a marginal deal and have a difficult time reselling it. Even though you are looking for quick cash, there are other ways to make a profit. For example, you can take a promissory note (a written, legal promise to pay) from your investor-buyer for part or the entire purchase price. This note will
be secured with a lien on the property and will contain interest payments. Or you can tell the investor you will accept a promissory note for the purchase price, with no payments due until he resells the property.
Partner with a Retailer
If a deal is rather thin and needs a lot of work, the retailer to whom you sell it may not have enough cash to pay you. In that case, become partners with the retailer. If you are flipping to an investor who will rehab the property, offer the property as your share of the partnership while he offers the materials and the
work as his share. When you sell the property, you split the proceeds. You may have to take less than half of the net profit to make
the deal work.
Minimize Your Loss
Sometimes you sign a purchase contract for a bad house. A bad house is one that you cannot sell for a reasonable profit. The problem may be a combination of paying too much, bad market timing, unforeseen repairs, or just plain bad luck. Keep in mind that you can always sell the house for what you paid or even take a loss if you have a lot of cash invested. Sometimes you have to move on and stop the financial bleeding. You must remember that when you make an offer, you have to include enough room in the deal for someone other than you to make a profit. Many beginners make this mistake. You cannot resell a property to another investor and make a profit if she cannot profit as well. If you expect to make too much profit and hold on to a property too long, you will lose out in the long run. When you are flipping properties as a dealer, the goal is moving them fast¡ª don't get greedy!
What you need to Remember
- A flipper buys property with the intent of quick resale.
- There are three types of flippers ¡ª the scout, the dealer, and the retailer.
- A flipper may act as a dealer on some transactions and a retailer on others.
- Establish a network of other investors to buy your properties.
- Use the MLS to sell your retail properties.
- Cut your losses on bad deals.
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