Please don't hate me but... - Posted by Rushtopher

Posted by Jeffrey Short on March 10, 2000 at 13:00:10:

Rushtopher,

Like you, I am a newbie also. However, I might be able to help you with your questions.

  1. You will probably need some money for the things that you mentioned. However, what if you sold a home “as is” and it was a simultaneous close? Any title fees would be taken out of the funds left after you paid your seller…and the rest would go to you. (Ok, that’s a simplistic explanation, but its basically true).

2)Usually when people talk about their deals here, they take into account the closing costs. If they rehabbed the home, they will take that also into effect.

  1. Don’t know…

  2. I would definitely have a lawyer, especially since it is your first deal.

  3. I wouldn’t say that it is “that easy.” However, realize that you may be able to get buyers from the original seller. How? What if they wanted to have owner/seller-financing and the original seller refused? If you have a way to sell the note for cash, you could step in… offer the buyer to owner-finance, and the rest is history.

Maybe the original seller is offering simply too much for the home – of course, you wouldn’t offer that much… but you would wait to see if the person become motivated enough to drop the price (or to accept your offer).

Hope this helps – and I hope you get some other opinions on this.

Jeff

Please don’t hate me but… - Posted by Rushtopher

Posted by Rushtopher on March 10, 2000 at 12:04:28:

I have some questions about flipping properties/contract.
I know this is a common newbie (that’s me) question,
so please direct me to where I can learn this if you’ve
already answered it. FYI I’ve read all the archives I can
find and all the how to articles. On to my questions:

  1. Where does the money come from? I know you don’t need
    any money for the house, but what about for a handyman to
    estimate the repair cost, for advertising, for title
    transfer, etc. I have nothing, which is why I want to start
    flipping contracts in the first place.

  2. When someone says they “flipped” a contract do they
    account for those costs or do they just take the buyer
    price - seller price - closing costs?

  3. What are the pros/cons to assigning a contract vs. a
    simultaneous closing?

  4. Is a lawyer necessary, especially if this is one of your
    first deals and you don’t have the capital?

  5. Is it really that easy to find buyers when the original
    seller couldn’t.

I love this site and look forward to profiting in flips.
If they are all you guys say they are, it could be just the
thing to rescue my family’s financial situation.

Re: Please don’t hate me but… - Posted by JohnBoy

Posted by JohnBoy on March 10, 2000 at 17:48:46:

“”“1. Where does the money come from? I know you don’t need
any money for the house, but what about for a handyman to
estimate the repair cost, for advertising, for title
transfer, etc. I have nothing, which is why I want to start
flipping contracts in the first place.”“”

When flipping a property the money comes from your buyer.
Use a handyman that offers FREE estimates.
If you can’t afford a simple ad in Sundays paper offering a “handyman special” for sale, then call all the “I Buy Houses” ads in your local papers to pre-qualify some cash buyers that can close fast! When you have a deal then just call your buyers to take them off your hand! This eliminates advertising costs.

“”“2. When someone says they “flipped” a contract do they
account for those costs or do they just take the buyer
price - seller price - closing costs?”“”

You found a house that is worth $100k in fixed up condition. You determine the cost of fixing and any other expenses would run $20k total. This would include repair costs, closing costs, holding costs to your buyer while he does all the repairs, his advertising costs to market the property, etc. Your buyer will need to make a $15k profit to justify tying up his cash and doing all the repairs. Next you determine how much profit you need out of the deal. let’s say $2500 in this example. You subtract the $20k in expenses your buyer will have, minus the $15k profit he needs, minus the $2500 you want. Your total is $37,500.00

You know the house is worth $100k after all the work is done and that would be what your buyer would expect to sell it for. So what’s the MOST you could offer to pay on this deal? $62,500.00 would be the MOST you could agree on paying. $100k - $37,500 = $62,500.00

“”“3. What are the pros/cons to assigning a contract vs. a
simultaneous closing?”“”

It mostly depends on the amount of profit your going to make on the deal that determines whether to assign the contract or do a simultaneous closing. In the above example, $2500 profit isn’t that big on a $100k property, so just assigning your contract would be the easiest way. Your in and out of the deal and made your profit. If you were going to make a large profit of say, $10k, then you may want to set up a simultaneous closing to keep your buyer from knowing how much your profit is. If your buyer thinks your making to much profit for just flipping him your deal then he will give you problems or refuse to deal with you unless you drop your price to him.

“”“4. Is a lawyer necessary, especially if this is one of your
first deals and you don’t have the capital?”“”

A lawyer isn’t “necessary”, but if you don’t know or fully understand what your doing, then you should use a good real estate attorney that does. The cost of the attorney would come out of the proceeds from the sale that you make as a profit. $200 - $300 bucks is well worth the cost to protect yourself.

“”“5. Is it really that easy to find buyers when the original
seller couldn’t.”“”

Depends on the deal. If your looking to flip for retail on properties then finding qualified buyers in a hurry could be tough. If your buying at wholesale and flipping at wholesale leaving the lion share of the profit in the deal for your buyers, then finding them shouldn’t be hard.