| Flipping Properties for
Cash Profits |
by William Bronchick & Robert Dahlstrom
from legalwiz.com
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.
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