Real Estate

Flip real estate or flip paper?

Trading real estate is not for everyone, but it is the fastest way to make money in the real estate business. Most everyone has heard of someone who bought a “run down” home at a good price well below market value, fixed it up, and sold it at a fair market price. Trading a “top fix” is definitely a way to make a reasonably quick profit. I know a few people who do it this way, but they are more in the contractor and renovation business than the investor mindset.

Some of these “superior repair” properties are in need of extensive repair and will involve electrical work, carpentry work, and the like. If the investor gets involved and does some or all of this work, then there might be enough profits there, but if the investor works with the required labor, the profits could be consumed quickly. For these types of changeable real estate investments, the purchase price must be heavily discounted and would normally be somewhere in the foreclosure stage.

For the person who is in the mindset of investing rather than in the renovation business, investing in real estate will only involve changing the property’s paper contract without even taking possession of it. You can turn around by signing an agreement to buy a property and then selling the contract to another investor before the escrow closes.

Using this technique won’t even require you to put your name in the title. Generally, the returns will be less than those of the top investor who repairs, but it involves much less work and the whole process is much faster. A repair investor would not be happy with making a profit of a few thousand dollars over a few months working on renovations, but an investor who can simply change a contract for a few hours or days of work would be.

Avoid disclosing your earnings to the new buyer by using a double close.

After making a good deal and changing a contract that involves a hefty profit, you may not want all of these details to be revealed to your buyer. The solution is a double closing, transferring the property to you initially and then immediately reselling it at the same attorney’s office just one hour later to your buyer.

There’s a downside here and it’s a double set of closing costs so you’d have to weigh it to see if it’s worth it for your particular situation or not. Also, you can use a title insurance company for the actual closings. For the issuance of the title insurance policy, the title insurance company will prepare the closing documents and close the transaction generally at no additional charge.

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