Flipping Real Estate or Flipping Paper?
Posted on March 8, 2010
Filed Under foreclosure investing |
Flipping real estate properties is not for everybody but it is the fastest way to make a buck in the real estate business.
Most everybody has heard of someone buying a “run down” house for a good price well below market value, fixing it up and selling it at a fair market price. Flipping a “fixer-upper” is definitely one way to turn a reasonably quick profit. I know some people who do it this way but they are more into the contractor and renovation business than they are of the investor mindset.
Some of these “fixer-upper” properties are in need of extensive repair and will involve electrical work, carpentry work, etc. If the investor gets involved and does some or all of this work then there could be enough profit there but if the investor farms out the required labour, profits could get eaten up quickly. For these types of flipping real estate investments, the purchase price needs to be at a huge discount and normally would be found somewhere in the foreclosure stage.
For the person that is in the mindset of investing rather than being in the renovation business then flipping real estate will only involve flipping the paper contract of the property without even taking possession of it. You can flip by entering an agreement to buy a property then sell the contract to another investor before close of escrow.
Using this technique won’t even require you to put your name on the title. Profits will generally be less than the fixer-upper investor but involves much less work and the whole process is much quicker. A fixer-upper investor would not be happy in making a profit of a few thousand dollars for a few months work on renovations but an investor that can just flip a contract for a few hours or days work would be.
Avoid disclosure of your profits to the new buyer by using a double closing.
After making a sweet deal and flipping a contract involving a juicy profit you may not want all these details to be revealed to your buyer. The solution is a double closing, transferring the property to you initially and then reselling immediately at the same lawyer’s office just an hour later to your buyer.
There is a drawback here and that is a double set of closing costs so you would have to weigh it out to see if it’s worth it to your particular situation or not. Further, you can use a title insurance company for the actual closings. For the issuance of the title insurance policy, the title insurance company will prepare the closing documents and close the transaction usually without an addition charge.
john ferreira
http://www.articlesbase.com/finance-articles/flipping-real-estate-or-flipping-paper-133606.html
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7 Responses to “Flipping Real Estate or Flipping Paper?”
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Should I purchase a home in my name to help out my family?
The real estate business bug has recently bitten my family. Specifically purchasing homes, flipping them, and then putting them back on the market. A great business! But recently I was approached with a proposition for a home to be purchased in my name. The reasons for doing so are because one of the family members recently purchased a new home and a new car. The other family member’s credit is not so good I assume. My credit is pretty good. I’m in my mid-20’s, no kids, still at home with parents, and saving money every week. They’ve let me know I could get a lump sum of money from the purchase, which sounds great. But I am not a money hungry individual. I love my family, but I know that the mix of family and money can sometimes lead to a Judge Mathis episode. I was contemplating having a contract or agreement drawn up for precautionary reasons. I know that life happens and anything can make this great opportunity into a terrible situation. I want to protect my future…my credit and my future family. Is anyone aware of some specifics that should be covered in this agreement that is legally binding (that covers someone in my position)? What are some questions that I should have answered to before signing any papers?
I love my family, but business is business!!!
don’t make a purchase you’re not ready to make, especially one so large. If you really want and can afford home ownership, then go for it.
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DON’T DO IT!
Business and family don’t mix…ever.
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Nope, don’t do it. Politely decline the offer and say that you don’t consider anything you ain’t an expert at.
Money and family don’t mix.
If they aren’t good credit risks to a lender, what would make them a good credit risk to you ??
Good Luck
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NEVER mix family with business, that’s a great way to destroy your credit and a lot of relationships as well. If their credit isn’t good enough for them to do what they want on their own, maybe that should tell you something….creditors don’t think they’d get their money back if they chose to lend it to them….you should take the same approach.
People make decisions every day. Obviously a new car and new house was more important than this or they wouldn’t have bought them. Let them figure it out on their own….tell them you’d have to feel comfortable making the payments should something go wrong & you don’t feel like you could at this time. They might be upset for a little while, but they’re your family they should understand that they can’t burden you for selfish reasons.
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If you purchase a home in your name be prepared to pay for it should the family member be unable to make a payment as you will be ulitimately responsible for the mortgage. I don’t think a reputable mortgage loan company would loan you the money for the home unless you have your name put on the deed. Make yourself the sole owner of the home so that should you need to sell it due to default on the family member, you can do so without their consent.
Personally, I wouldn’t do this as money has ruined many a family relationship.
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This sounds like a really bad idea.
Worst case scenario - you’re on the hook for mortgage payaments and property taxes etc.
If they really want to do this then they should invest something too. Sounds like you would be risking everything (like your credit rating and financial future) and they are risking nothing. If it doesn’t work and it blows up in their face, what do they loose? Nothing! And where does that leave you?
Bad bad idea
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