Flipping
Properties for Cash Profit
Real estate, like
any other commodity, is bought and sold every day of the week.
Many people become real estate agents because they know a small
piece of a large pie means big bucks. Agents help facilitate a
sale by finding a willing buyer for a willing seller, earning a
commission of approximately four to seven percent of the sales
price for making the deal happen.
It is relatively
simple to get a real estate license, and it is a lucrative field
for many people. However, as you may expect, there is strong
competition among agents, and the ones that are successful work
long, hard hours. In fact, most agents are on call weekends and
nights, with their cell phones glued to their ears. Furthermore,
real estate agents are required to take continuing education
classes and follow strict guidelines set forth by bureaucratic
agencies. There are better ways for an "entrepreneur" to
make a living!
The
Flipper
Investors that
"flip" houses accomplish the same basic task that real
estate agents accomplish. Specifically, the "flipper"
investor buys real estate with the intention of immediate resale
for profit. As a flipper, he buys properties at substantially less
than the going or "retail" rate. He acts as both
principal and middleman, buying at one price, then reselling at a
higher price. If a deal is marginal (not much profit) and he adds
no value to the property, the flipper's profit is commensurate to
that of a real estate agent. However, unlike an agent, the flipper
may only have a few hours of his time tied up in the deal.
Furthermore, the flipper's upside profit potential is much higher
than an agent's commission, since an occasional bargain purchase
can bring a tremendous return.
The flipper does
not need a license to practice, nor is he under the oppression of
a government agency. He benefits from low overhead, flexible work
hours and he doesn't have to drive a Mercedes to be taken
seriously (although he can certainly afford one).
Three
Different Types of Flippers
There are three
different types of flipper investors, usually based upon
experience:
-
The Scout
-
The Dealer
-
The Retailer
The
Scout
The Scout is an information
gatherer. 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.
The
Dealer
The Dealer, like the Scout,
locates deals for other investors. He locates a bargain property
and signs a purchase contract with the owner. He then has the
option of closing on the property and selling it outright, or just
selling his contract to another investor. He is providing more
than just information; he is controlling the property with a
binding purchase contract. The Dealer often puts up earnest money
to secure the deal, so he assumes more risk than the Scout does.
Since the Dealer controls the property with a purchase contract,
he has greater profit potential than the Scout does.
Dealers can flip as many deals as they can find. On a full-time
basis, a Dealer can make well over fifteen thousand dollars a
month without ever fixing a property or dealing with a tenant. On
a part-time basis, a dealer could easily make an extra three
thousand dollars a month flipping a property or two. The dealer's
lifestyle is that of a true "entrepreneur." He can work
as much or as little as he likes, with no boss, no employees and
the freedom to do as he pleases!
The Retailer
The Retailer usually buys properties from a Dealer or
with the assistance of a real estate agent or Scout. The
Retailer's goal is to fix up the property so he can sell it for
full retail price to an owner-occupant. Compared to other
flippers, the Retailer puts up the most money, has the most risk
and stands to make the largest profit on each deal. However, it
may take the Retailer months to realize his profit, unlike the
Scout or Dealer who makes his money in a matter or days or weeks.
About the Author . . .
William Bronchick, CEO
of Legalwiz Publications, is a Nationally-known attorney, author,
entrepreneur and speaker. Mr. Bronchick has been practicing law
and real estate since 1990, having been involved in over 600
transactions. Visit his site at http://www.LegalWiz.com
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Oleg Potemkin (RA) Hawaii Realty
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Ali'i Place, 1099 Alakea
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