Flipping
Quick Flips By Brandy Eismon
By Brandy Eismon
Jun 18, 2005, 00:35

Quick flips are often referred to as "wholesaling." You flip a property when you turn a house over quickly by turning it over (or flipping it) to another investor, usually for the other investor to repair.

You may wholesale the house by putting it under contract, and then selling your contract to another investor.

So the end investor is the one who will be doing work on the house instead of you.

This is an easy way to earn three or four thousand dollars. Sometimes less, sometimes more, depending on the project. Your profit is reward for finding a rehab property at a good price.

What you want to do ?a lot of times this has to do with rehabs ?you want to make sure you have it under contract with dollar values you would find desirable if you did the work yourself.

If you aren’t working hard to get the best value for the end rehabber ? the person who is buying from you ?then you are burning bridges. Why not flip a deal to a rehabber, and then repeat the process again for the next deal you find.

You want to avoid arranging a shoddy deal, and then flipping it to a unsuspecting newbie. It’s just better business practice to not try to live by the greater-fool-theory, hoping you can flip the bad deals to an unsuspecting fool.

Wholesaling is a great way for someone to enter the real estate investing arena. Someone who doesn’t have much money ?or maybe not the know how to do rehab. It doesn’t take much money ?maybe a little advertising and gas money ?and sometimes earnest money. But little else.

You still should have a little bit of knowledge to do wholesaling. You have to know what is a good deal ?how much you should offer to put it under contract. So you can offer a good deal to your investor buyer.

I gave you the example of the hundred thousand dollar house. If the repairs cost ten thousand. Then you would offer seventy percent of the after repair value, minus the rehabbing of ten thousand, and then minus how much you want.

In this case, if you wanted three thousand, then you would have to put this house under contract for fifty seven thousand.

You assign your contract to your investor buyer is what you are doing. On your purchase and sales you write ABC company or assigned.

You will occasionally get some flack for putting "or assigned" in your contract. I usually just say, I don’t know if it will be taken in my company name or my partners.

The biggest opposition I’ve had to using "or assigned" was on REO’s. A have had a few which wouldn’t let me do it. But over all, I haven’t had much trouble doing it.

And then you write a one page letter assigning your rights to another investor. This letter goes to the investor buyer buying from you. He or she will need it at the time of escrow to close.

What I would do to give it to another investor is I would expect them to pay me the three or four thousand dollars now. Not after closing ?they need to do it up front. After they have built a track record with me I’m a little more flexible.

You can do it AT closing, and have yourself as a line item of the expenses the investor buyer is incurring. He or she can work this easily with hard money loans. Some of the finance companies are a little funny about it though.

A side note to telling if an investor buyer is a good one ?ask them up front how much time they need to close. The good ones will say, "right away". The bad ones want lots of time. Shy away from them. They will burn up all your precious time.

If you have 30 days to close, you don’t want to give your investor buyer that much time. Because, if they are not able to close you need some time to find another investor. You don’t want to give them 30 days and then on the 29^th day find out it’s not going to work for them. You’ll end up holding the bag and losing your deal.

If you don’t take the full money, the three or four thousand up front, at least take a non-refundable five hundred. And then collect the rest from them at closing.

If you want to flip to other investors, the typical contract, is a rehab. But you could flip a lease option. On a lease option you probably won’t get as much as a rehab ?but you could still do it.

You could put a short sale under contract. Finish all the paper work and then flip the contract to someone else. Now that one is not quite as easy, you could get more money than a lease option, you could get three or four thousand.

How it would work is you collect their money up front and then you assign them your contract. Some times this will work and other times it won’t. It depends on the company you are working with. On the short sale some will allow you to say "or assigned" and some won’t.

I haven’t had too much problem. Although, normally, I prefer to keep my contracts rather than flipping them to another investor.

What I am going to be covering now are some miscellaneous items.

The first thing has to do with how to stream line your time. I have other people do things for me. I don’t mow my own lawn, you can hire some one for almost minimum wage.

The same with house cleaning ?you can hire someone to clean house in my area for about twelve to fifteen dollars an hour. That’s one way to free up some time.

The biggest time burner, or course, is the television. Now I know there are a lot of people out there who don’t want to change their life style. There’s nothing wrong with that, I’m just talking about using your time more efficiently.

Like, don’t sit in front of a television if your favorite shows are on at eight pm and ten pm ?don’t sit for the time between your favorite shows and watch what you don’t want just because you are sitting there. Use the VCR ? record what you want then watch it all at once. Don’t sit in front of a TV and vegetate on the shows you don’t even like.

When you first start in real estate you’re going to be spinning your wheels chasing leads that really aren’t worth it. The number one thing in real estate investing is ?work only with people who are motivated sellers.

Why spend your time trying to motivate someone to sell their house to you. The motivated people already know they are motivated.

Once you find them ?those are the ones you want to spend your time and energy on.

If someone calls you on the phone, why run over there and look at it before you screen them and ask them a few questions.

Also, stream lining your time has to do with selling as well as buying. When I sell a house, I want to prequalify someone. I won’t jump up and show a house just because someone saw my ad in the paper.

Like I said, most of my houses I like to sell on lease options. I rarely have to show more than three times before I have a buyer. That is because I stream line my time and have them prequalified before I’ll even meet them.

A lot of times I’ll get a call and the person hasn’t even taken the time to drive past the house yet ?they just saw my ad in the paper. So I’ll say, "drive by ?and if you like the house just give me a call and we’ll talk about how it works".

I will never never arrive at a house where they haven’t been prequalified, except in the event of a open house.

I will talk briefly with the potential tenant and I’ll ask them, how’s your credit. They’ll tell me good bad or ugly. Then I’ll ask about their income and how long they have been working on the job. So I can get a feel for if they would even qualify before I show them the house.

Some investors will do a credit check before they even show the house. I usually don’t. I can get most of the information I want from the tenant and THEN do a credit check if they sign the documents I require.

If they’re not willing to divulge that information then I’m probably not willing to see them.

Another time saving tip. One thing I don’t do is get involved in detailed inspections when I purchase a house. I take a quick run through inside and out before I make my offer. And then at that point I make an offer contingent upon a 14 day inspection.

I don’t spend a whole lot of time doing it ?I don’t measure the floors, I don’t count the windows and such.

I make an offer really quick and once they accept ?then I’ll take my time to do a detailed inspection ?or hire someone to do it.

I’m really into streamlining and goal setting. When you start out, get a note book and make weekly goals for yourself. Even daily if you’re disciplined. I prefer daily goals.

What I do is I make a monthly goal list ?then as I’m making my daily goal list ?I will look at my monthly goal list to make sure I’m working on my targets.

I’m a firm believer that what gets measured gets accomplished. If you don’t write down your goals ?how will you know when you’ve reached them.

Some times I get asked, where and what to buy. And my answer to this is ? you buy whatever is a good deal.

Sounds pretty straight forward ?but if I ran across a multi-family that was a great deal ?I’m not going to pass over it because my goal was 10 single family homes.

But, if you want to know what I would target ?I would target single family homes ?three bedroom starter homes. The average is around 1200 square feet. Those are the easiest to buy, and the easiest to sell.

The area I want to buy in is areas that are improving- not necessarily in neighborhoods where you would want to live. They are working class neighborhoods ?you don’t see many joggers, if any, or any really fancy cars. They are generally starter homes.

Avoid, crime and drug areas. Stay away from upper class expensive houses until you learn the ropes. There is a lot more chance of making mistakes in the higher end houses.

I like to find houses not more than 30 miles from where I live, preferably closer. I’ve tried farther and it gets to difficult.

Don’t get me wrong though. There are many many millionaire real estate investors that travel world wide to buy their properties. So I’m not knocking them ?I’m just saying for learning and starting out ?stick with your own back yard.

When you’re in the category of a Robert Kiyosaki, who buys million dollar properties, then you can travel the world and buy property.

A trick to getting your offers accepted ?I’m running out of time here and I wanted to get this point in.

To increase your chance of having a seller accept your offer ?offer them more than one offer.

But make all offers offers you would be willing to live with. Don’t make an offer hoping that’s the one they won’t accept.

I usually offer two or three.

You can do trades, partial carry back, money at the end, a percentage of it after you rehab it. Be creative.

My last little tip is about privacy. To keep your properties private from your tenants talk to your lawyer about putting your properties into a trust. A land trust is nothing more than a legal entity whose sole purpose is to hold title to the property.

This can keep your tenants from knowing your name and doing research on their own to see if you are worth suing.