Flipping Real Estate

"Flipping real estate" is a term used in real estate investing.

It simply means buying a property and selling it again quickly, hopefully for a substantial profit.

It's not illegal, it isn't even unethical ... it's just business.

The belief that flipping real estate is illegal, is sometimes the result of media stories designed more to excite than inform. That view is changing with the proliferation of TV shows about flipping houses.

The practice of attempting to deceptively inflate the market value of a property, falsify documents, and/or act in collusion with others to defraud a buyer is definitely unethical and rightly illegal. But that's not flipping property, that's plain old fraud, perpetrated by plain old con artists.

In order to flip a property, you first have to find one that's flippable. That usually involves finding either a "fixer upper" and "fixing it up" quickly for a fast sale, or finding a homeseller who's eager to sell at a bargain price.

Flipping Real Estate: Start Networking!

Talk to friends and relatives, business contacts, bankers, real estate agents, or anyone else who can give you a lead to a bargain. Often, simply driving around the right areas will allow you to spot a potential bargain. Watch for those "For Sale By Owner" signs or knock on doors. Find lists of foreclosure homes online.

Flipping Real Estate: Do Some Digging!

Public records sometimes contain references to "fire sales", and ... if you dig deep enough, you may occasionally locate property owners finding it difficult to make their mortgage payments. When you find one and they agree to sell, you're getting something you want ... a property that might turn a profit. They're getting something they want ... relief from a debt burden they can no longer manage. It's a Win - Win and nothing unethical about that.

Some deals are possible that don't even require you to put your name on the title. You can 'double-escrow' a seller who wants to remain living at the property. Double escrow involves taking a very long escrow — longer than say 90 days — and reselling the property during the escrow so that both deals close escrow on the same date. In a rapidly rising market, the buyer(you) can then take advantage of the increase in the sale value of the property.

You can "flip real estate" by entering into an agreement/contract to purchase a property, then sell the agreement/contract to another investor before close of escrow. You could pocket anywhere from $500 to $5000 and not even need to find financing.

To be successful at flipping real estate, you need to master a steep learning curve and look honestly within. It is not for the faint of heart.

You need to learn how to spot that hidden gem and learn to judge buyers and sellers. A little knowledge about property repair will come in handy as you will probably be doing some yourself. That means finding out about plumbing, carpentry, painting and many other skills that may not be the first love of the beginner real estate investor.

You need to be able to multi-task as flipping real estate involves dealing with lots of details in a short span of time. If flipping property is something you want to pursue, develop a high tolerance for risk. Stressed buyers aren't usually the most calm, reasonable people to strike deals with. They often have poor credit and can back out on a deal at the last minute.

Hone your negotiating skills and develop relationships with contractors and lenders, especially the kind that can be relied on to move quickly when you need them. While you're at it, be sure to have a trustworthy accountant and a responsive lawyer/attorney available, unless you already have these skills.

Learn about Contract and Real Estate Law, and study the tax consequences of buying and selling properties before getting into a situation that could be costly.

Here is more information on flipping houses and maximizing your investment return.