Posted by ScottE on December 08, 1998 at 10:09:41:
My contract allowed me to assign it to another party. I ran the ad, found another interested investor, signed a Assignment of Contract agreement with the investor and he assumed my position in the contract.
Be sure and have a Contract to Purchase that has an escpe clause or two, allows you access to the property for inspections, and allows you time to find another buyer and time for them to find financing if they need it.
I’ve also found that having a handful/list of investors to shop your deal to helps turn the property quicker.
Posted by Sonia(VA) on December 07, 1998 at 22:11:37:
Does flipping REALLY work when you have no cash, bad credit, and your world is falling apart? I’m probably about to ask really stupid questions, but I’ve been reading the newsgroup questions for about 2 weeks now… Jackie in Dallas gave me the first real hope with her simple plan. I’ve called the “I buy houses” ads, and I’m looking for properties now. One of the investors that I talked to warned me about ‘assigning’ my contract, because if my buyer does not close, I could be held for specific performance!! I’ve called the tax assessor’s office to find out how to get the name of owners of property that I may find.
IF I find a property, (and I really mean IF), am I REALLY going to be able to offer a contract to buy “subject to approval by my partners”, then assign the contract to an investor for a profit without getting into some risks that I am not prepared for?
Also, Jackie in Dallas says to offer the owner about 50% of the house’s value. How do I determine a conservative estimate of the value, especially if it needs repairs, cosmetic or major?
I am desperately in need of your help. I don’t have any money right now to order any courses, so I spend a great deal of time on this great site, hoping to learn all that I can, and telling myself “I am going to be a successful REI because I have to…I have nowhere else to turn to.!”
One of the best ways to make sure it does close is to get a “substantial” (ie. >$1000) earnest deposit from your buyer, or perhaps the WHOLE assignment fee. That’s a lot of money for someone to just walk away
from. Make sure your contract with your buyer says if they don’t close on the date set, they loose all their earnest $$ – no extensions unless there is a problem with the title or the title company does not have the closing documents ready for some reason.
Ask for references from a title company your buyer has worked with - check them out by calling the title company. Ask to see some of the houses they have rehabbed. Make sure they are a REAL cash buyer.
One thing you definitely want to avoid is some jerk tieing up your contract so THEY can try to flip it.
There’s just not room in a flip for a middle man (or woman).
But if your buyer DOES walk (I’ve never had it happen) - you can use part of the earnest money as an “incentive” for your Seller to give you more time to find another “partner” – maybe split it 50/50.
If you have adequate contingencies clauses in your contract - plus make yourself liable for no more than your initial earnest deposit ( which should be less than $10) then you don’t have to worry about a law suit for specific performance.
Don’t forget the escape clause, " Contract subject to inspection and approval of property by Buyer’s partner." If you can’t find someone to sell the house to - you need to notify the Seller and the title company in WRITING, certified mail, that your partner did not approve. Per terms of the contract, you’ll get all of your earnest deposit back.
TAKE ACTION! TAME THE FEAR MONSTER AND JUST DO IT!
Re: does flipping REALLY work … - Posted by Felisza
Posted by Felisza on December 08, 1998 at 08:38:59:
I don’t have experience in flipping assigned contracts, but I’m trying to purchase, fix-up and do some quick resales. My credit isn’t all that good, and I don’t have money to put down or pay closing costs, but I have obtained one rental I have one fix-up and then rent out that is being processed, and I signed loan paper to process another rental that will hopefully close no later than the end of next week. If you don’t have the money I learned the key is reading and learning as much as possible about different methods to get around those things. See if you can find a mentor in your area. Read read read. I’ve found a few good real estate investing books in the library and bookstores. I’ve been invovled in real estate for two years now and this is my first property. I’m not in a rush, because if you take the time to network and meet people you’ll learn things. Also it helps to find the perfect seller. The rental I bought I put $100 dwn , he paid my closing and I received $3000 back at closing. I’m doing the same with this other rental, except I’m not coming out of my pocket with anything and should receive around $3000 back. It helps to have a good broker to work with who know the ends and out, is about their business, and no what to do with your credit, and willl get you in and to closing. The first deal took me 3 weeks total, and this one about 1 1/2 weeks. There are a few other sites pertaining to real estate visit them, read every article you can ask questions. Everyone on this site is great. They are so helpful. I don’t know enough to teach you anything, but I’m right here in Baltimore, so if you need to chat look me up.
Re: does flipping REALLY work … - Posted by Scott Britton
Posted by Scott Britton on December 08, 1998 at 08:28:19:
Sonia,
Yes… wholesaling property to other investors does work. In fact… it works real good!
You need a good working knowledge of Real Estate Contracts to make it work (and avoid the Specific Performance penalty). If you want a free education… sit down with your local Real Estate Board approved contract and read it line by line. Then… put together your own contract… leaving out the clauses that are detrimental to your financial health… such as the Specific Performance clause.
Add a good Assignment clause… and you’re on you way to knowing more about contracts than anybody else in your area. It’s really not that hard.
Re: does flipping REALLY work … - Posted by ScottE
Posted by ScottE on December 07, 1998 at 22:28:05:
Sonia,
I tied up a 4-plex about 3 weeks ago with $500(probably not necessary) that was being sold for $62k. I put an ad in the Sunday paper two days later for $68.5k to sell it fast…and got 27 calls. Mostly tire-kickers, but I had two stone cold investors and I agreed to sell/assign to one of them for $66.5k. If you’re keeping score at home, that’s $4,500 profit, set to close on Jan. 4. I figure I’ve spent about 15 hours on this deal, so $300 an hour isn’t too bad is it?
It CAN be done, but use these friendly words of advice: Read all you can on this site, ask questions, and GET A GOOD, SOLID CONTRACT. It will save on the headaches.
Thanks to Jackie in Dallas … - Posted by Sonia(VA)
Posted by Sonia(VA) on December 10, 1998 at 18:40:40:
Thank you so much!!
I am going out on Saturday morning in a couple of older neighborhoods to look for vacant and/or run down properties. I am so excited after reading your posts.
I took your advice, called the “I buy houses” ads, and told them I was a new investor. Not only were they interested in being called (well, 2 of 3 were), but they were very free with their advice!
My goal is to flip 1 property so I can make it to the convention in March.
Again, thanks for all your help, it has been invaluable!
Re: does flipping REALLY work … - Posted by Doris - Va.
Posted by Doris - Va. on December 08, 1998 at 17:06:13:
You described several deals that you have done or are doing with no money down and with money back at closing. For a newbie this sounds great but the question is — HOW DID YOU ACCOMPLISH THIS? I know it can be done. Please tell me how you set this up or how it was set up for you by the realtor? I am also reading - reading - reading and just haven’t found a way to get started with no money. I feel like I’m at an auction where I need to bid with great confidence but the fact that I only have $50 with me has a definite dampening effect on my bidding. I’m trying to raise some working capital but it is slow going. (Anyone want to buy a used motorhome for restoration???) Doris - Va.
Re: does flipping REALLY work … - Posted by Valerie
Posted by Valerie on December 08, 1998 at 09:22:24:
How did you assign/sell a property you didn’t actually own? Did you do concurrent closings or did you substitute the investor as the buyer instead of you? I’d be interested to know how this worked. I have a deal I could use this on. Thanks!
I just hope you put the advice I’ve given you into action – I’ll warn you right now - it’s not going to always be easy - but if you’ll just make up your mind RIGHT NOW that you are NOT going to give up, you’ll make LOTS and LOTS of money in this business.
The sooner you develop a DON’T QUIT kind of attitude, the sooner you’ll start seeing results in your pocket book.
Good Luck - Just send me e-mail to me or put a post on the newsgroup if you need help!
I use a hard money lender - it costs me 18% SIMPLE interest (or 1.5% per month) no points but there is a prepayment penalty which will not exceed $1200.
It’s cheap money if I can make $10k - 15k - 20k+ in a few months.
If I buy right, they will put up all the money for purchase, insurance, closing costs & rehab. I don’t have to make any payments on the loan for 2 months - so I push to finish the project and get it sold before I have to come out of pocket any $$.
The other suggestion is to negotiate that your seller will be your bank! You should always make at least 2 offers when buying a house - one for all cash - and one for a bit more $$ with some or all owner financing. I’ve been able to get 100% owner financing with no payments and no interest for 6 months – just for the asking. In this situation it was more important for the seller to get rid of the property than to get quick cash. REd tags are prime candidates for these kind of terms.
Heck, you can put the rehab material on credit cards and make the minimum payment until the house sells. And negotiate with your contractor that you will pay him 10% or 20% more than his bid if he will accept his payment AFTER the house sells ( don’t make the offer until AFTER you get the bid)
Get creative and you won’t need cash - AT LEAST NOT YOUR CASH.