Ready to start 'flipping' -- a little help please - Posted by Keri

Posted by JoeS on February 12, 2002 at 21:57:03:

In your “broke” situation, I would suggest assigning your contract for a fee, “flipping the paper” so to speak. I do not like the term flipping. When you want to put a house under contract to buy with the intention of selling that contract, you should have done the following first:

  1. Locate several investors who will buy the contract for a reasonable fee. You can advertise in the weekly paper very inexpensively.
  2. Become very familiar with the types of houses these several investors are looking for. It is to your advantage to be able to locate a variety of houses.
  3. Become very familiar with the sold values for the past 6 months in your area. Study the MLS sold book like your life depended on it…it really does! If you do not know values, you may overpay, your investors will not want it, and you are stuck!
  4. At this point you can begin to “flip” contracts.
    Happy investing, hope this helps.

Ready to start ‘flipping’ – a little help please - Posted by Keri

Posted by Keri on February 12, 2002 at 21:13:15:

What an excellent group you have here! I’m so glad I found you!

Okay, I’m ready to go…
I’m broke, unemployed (layoffs), and have never purchased a house but have done my research and decided that the safest way to ‘get my feet wet’ in real estate is by starting with ‘flipping’ property contracts.

I will be looking at pre-foreclosure homes and have a pretty good idea of how this will all work from how to find the homes, how to talk to distressed sellers, how to tell if it’s a good deal (FMV, comparables, etc), how to find investors to ‘flip’ to, even the contract including important clauses to include etc.

My question is this…

Because I have never ‘closed’ on any type of property before and am not sure how this is all going to work…

What happens at the closing when the seller, ‘flipper’ (me), and investor all go to closing? Are all closing costs covered by the investor since I’m ‘flipping’ the contract/property to them? Also am I supposed to let the investor know how much I’m making on the deal and, if not, how could I possibly conceal that? Would it still be honest?

Also, how can I show the investor the property (because being a pre-foreclosure it will probably need some repair and any investor would want to see the property) without the investor making a deal with the seller behind my back?

Would I still have to pay appraisal costs? Can I pass them on to the investor?

If anyone could direct me to a course and/or other resource(s) that literally spells out the step-by-step specifics of closing a contract ‘flip’ deal including all applicable costs etc (for someone who knew absolutely nothing about real estate before:) it would be very helpful.

I want to make sure ‘all my ducks are in a row’ before I end up at a closing not knowing what to expect. Being broke, I can’t afford to really put any money into this when I start…I know it can be done – I just need to know specifics to keep myself out of trouble:)

I appreciate any help, guidance or advice you can contribute.

Thanks for your time and help,
Vancouver, WA / Portland, OR - USA

Re: Ready to start ‘flipping’ - Posted by Robin (OR)

Posted by Robin (OR) on February 13, 2002 at 24:30:56:

HI Keri! Looks like we’re neighbors. I’m located on the west side of Portland (Hillsboro/Forest Grove area). I’m also a newbie, also wanting to wholesale to get started. I’d love to chat with you sometime! Also, do you know about the Northwest Real Estate Investors club? Next meeting is this coming Monday night at Izzy’s restaurant @ the corner of NE Halsey and 102nd, just off I84. Last month was my first meeting, so you may have been there and I wouldn’t know it - I met several people. It was so great to meet people who are actually doing this, and are so willing to help others get started. This site is wonderful, but there’s something about talking to people face to face. So if you’re not already in the group, I’d encourage you to come. The first meeting is free to newcomers, after that there’s a minimal charge or you can join. Feel free to email me or call me at 503-985-7865 evenings/weekends. Not that I can be much help, being so new myself, but maybe we could encourage each other! My husband doesn’t believe this will work, and probably won’t until I bring home some money, so I’m continually looking for sources of inspiration and encouragement. Good luck!

Re: Ready to start ‘flipping’ – - Posted by Aaron

Posted by Aaron on February 12, 2002 at 23:48:53:

Here is some free advice (worth about as much as it is going to cost you):
Questions 1) When you go to the closing, with the seller, you, and your buyer, there should be contracts that have already been signed and taken care of (purchase & sale agreements), it doesn’t matter who knows what, there is nothing they can do about it anyways. I wouldn’t suggest telling the person you are selling the property to what you are making out of the deal, the only reason you are investing your time into the deal is to make a profit, they will already know that, how much of a profit is none of their business, if they ask my standard response is “Less than you” (right off of a seminar tape). As for the closing costs, you shouldn’t pay anything, your seller pays the sellers customary closing costs, and your buyer pays the customary closing costs, there is nothing left over for you to pay, maybe a small fee pre-negotiated by you and your closing agent. (First off, get a good relationship with a closing agent that knows how to work with simultaneous closings).
Question 2)The investor will realize that the property will need repairs (you should be able to estimate the repair costs before you even sign the contract with the seller, to make sure your not paying too much for the house, then, tell the buyer your estiamtes, also get some comps on the property of how much it will sell for in excellent condition, after repairs are made, if there is a big enough spread, you shouldn’t have a problem selling it at all), and don’t be afraid of your buyer going behind your back, you will already have a signed contract with the seller.
Question 3) NO, don’t ever get the house appraised, do the comps yourself, especially when you are Wholesaling (flipping). There are some very simple formulas to figure out how much the property is worth, what the repair costs will be, and how much profit you should allow for your buyer and yourself (more importantly).
I would suggest going over Steve Cook’s book, or spend some money on a Real Estate Investing course if you are serious about getting into this.
As for selling contracts to Investors, its very very very simple, you already did the work to get the seller to commit to a purchase agreement, all the hard work is finished, all they have to do is sell it and walk away with their profit, you should charge a minimal fee of 3k (depends on how well you negotiated with the seller and how much spread you left for the investor, if the spread is huge, CHARGE MORE!)
I hope I shed a little light on your situation, it’s free advice, take it for what it’s worth.

Read Steve Cook’s Book - Posted by Scott M

Posted by Scott M on February 12, 2002 at 22:59:34:

I would highly reccomend Steve Cook’s “Wholesaling for quick cash” available on this site. It will detail how the closing will work, outline the HUD-1 form (Settlement Sheet), and give a breakdown/description of each charge for the parties in the flip.
He also gives you some great sample forms (contract, offer worksheet, a sample H-1, and completed appraisal form)

I just read it twice, and I think it is the most helpful flipping/wholesaling books I have bought, yet.