Wholesaling or quick “flipping” is the practice of locating properties – usually rehabs – at very cheap prices and quickly passing them on to bargain hunters at prices well below retail. Anyone can quick flip, even the most inexperienced investors.
Likely targets for quick flipping:
• Low priced homes only
• Priced well below the value that they’d be worth after the repairs are done
• Usually need a lot of work. In fact, the more run down the better – remember – you’re not going to be doing the work – you’re going to be selling them to someone else who will do the work.
• They should be in decent, marketable areas where families would want to live.
REO’s (bank-owned) properties work the best.
Quick flipping works best in lower-priced areas because you’re dealing with smaller numbers in terms of purchase price, and your buyers will find it easier to raise cash for the purchase.
Older sections of town are where you want to concentrate your efforts, where first time buyers can afford the lower prices, where older homeowners still have pride of ownership but perhaps not the funds to maintain their properties in tip-top shape.
Here are the nine steps you need to take in order to quick flip a property:
1.) Make your offer – once you’ve located a likely prospect, you need to make an offer to the property owner. You must keep your customer, the rehabber, in mind when making your offer, because you’ll need to allow for enough margin for both of you to make a profit. Leave room for:
• cost of repairs
• closing costs (both buying and reselling)
• holding costs
• profit for your customer
• profit for you
2.) Once the offer is accepted, sign the contract to purchase the property – at this point is when you give them the earnest money deposit.
3.) Start the Title Work – have whoever handles your title work start on the property. There are a couple of reasons to start the title work right away: you’ll want to close as soon as possible, and if you find a buyer who is eager to close right away, you’ll want to be prepared to do so.
4.) Begin marketing for a buyer – Quick flipping means turning the property over in a hurry. If you don’t already have a buyer in mind, I’ll start making phone calls on my buyer’s list to find a prospect. If that doesn’t work, I’ll place an ad in the Sunday paper in the real estate section.
5.) Come to an agreement with a prospective buyer – Whether you end up with one buyer or several
will depend on the specific deal. Obviously, the more buyers you have interested in a particular property, the higher your ultimate sales price should be.
6.) Qualify the prospective buyer – Pre-screen your buyers – it will save you enormous amounts of time and trouble over the long haul. Make sure they have either the cash or credit line to purchase the property. (Ask for a proof of funds letter.) Or verify they’re creditworthy enough to obtain a loan.
7.) Sign a contract with the buyer and collect a down payment – After verifying your buyer’s source of funds, execute a sales contract and collect the down payment.
8.) Submit the executed documents to the title company – Submit both sets of executed documents to the title company – the contract with the original seller, and the sales contract with your rehabber buyer. Schedule a closing date.
9.) Close on the property – pick up your check, and find another property to quick flip!
The advantages to quick flipping property:
• There are no negotiating skills needed
• You need no money or credit
• Very little experience or training is needed
• Little to no risk involved – you’re acting as a middleman
• You can make money quickly and easily
• Very little time invested
• Little or no overhead
There are some disadvantages, but only a few:
• Quick flipping involves only about 25% of the real estate market at best
• You only get paid once – there’s no repeat business because you’re not doing the resale – your rehabber is
• Usually only works in neighborhoods needing work
But with a little research, some good contacts and an eye for distressed properties, you can make a very good living quick flipping houses!
