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Flipping
Properties for Cash Profit
Real estate, like any other commodity, is bought and
sold every day of the week. Many people become real
estate agents because they know a small piece of a large
pie means big bucks. Agents help facilitate a sale by
finding a willing buyer for a willing seller, earning
a commission of approximately four to seven percent
of the sales price for making the deal happen.
It is relatively simple to get a real estate license,
and it is a lucrative field for many people. However,
as you may expect, there is strong competition among
agents, and the ones that are successful work long,
hard hours. In fact, most agents are on call weekends
and nights, with their cell phones glued to their ears.
Furthermore, real estate agents are required to take
continuing education classes and follow strict guidelines
set forth by bureaucratic agencies. There are better
ways for an "entrepreneur" to make a living!
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The Flipper
Investors that "flip" houses accomplish the
same basic task that real estate agents accomplish.
Specifically, the "flipper" investor buys
real estate with the intention of immediate resale for
profit. As a flipper, he buys properties at substantially
less than the going or "retail" rate. He acts
as both principal and middleman, buying at one price,
then reselling at a higher price. If a deal is marginal
(not much profit) and he adds no value to the property,
the flipper's profit is commensurate to that of a real
estate agent. However, unlike an agent, the flipper
may only have a few hours of his time tied up in the
deal. Furthermore, the flipper's upside profit potential
is much higher than an agent's commission, since an
occasional bargain purchase can bring a tremendous return.
The flipper does not need a license to practice, nor
is he under the oppression of a government agency. He
benefits from low overhead, flexible work hours and
he doesn't have to drive a Mercedes to be taken seriously
(although he can certainly afford one).
Three Different Types of Flippers
There are three different types of flipper investors,
usually based upon experience:
* The Scout
* The Dealer
* The Retailer
* The Scout
The Scout is an information gatherer. He is the "bird
dog" who finds potential deals and sells the information
to other investors. Many people get started as a Scout
for other investors because it does not take any cash
or prior knowledge to look for distressed properties.
The Scout finds a property for sale, gathers the necessary
information, and then provides this information to investors
for a fee. The fee will vary depending on the price
of the property and the profit potential. The Scout
can expect to make five hundred to one thousand dollars
each time he provides information that leads to a purchase
by another investor.
The Dealer
The Dealer, like the Scout, locates deals for other
investors. He locates a bargain property and signs a
purchase contract with the owner. He then has the option
of closing on the property and selling it outright,
or just selling his contract to another investor. He
is providing more than just information; he is controlling
the property with a binding purchase contract. The Dealer
often puts up earnest money to secure the deal, so he
assumes more risk than the Scout does. Since the Dealer
controls the property with a purchase contract, he has
greater profit potential than the Scout does.
Dealers can flip as many deals as they can find. On
a full-time basis, a Dealer can make well over fifteen
thousand dollars a month without ever fixing a property
or dealing with a tenant. On a part-time basis, a dealer
could easily make an extra three thousand dollars a
month flipping a property or two. The dealer's lifestyle
is that of a true "entrepreneur." He can work
as much or as little as he likes, with no boss, no employees
and the freedom to do as he pleases!
The Retailer
The Retailer usually buys properties from a Dealer or
with the assistance of a real estate agent or Scout.
The Retailer's goal is to fix up the property so he
can sell it for full retail price to an owner-occupant.
Compared to other flippers, the Retailer puts up the
most money, has the most risk and stands to make the
largest profit on each deal. However, it may take the
Retailer months to realize his profit, unlike the Scout
or Dealer who makes his money in a matter or days or
weeks. |
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