Flipping Real Estate for Cash!
Even though I've only been in REI for a couple of years, I've been blessed to develop quite a nice
little niche' in our local wholesaling market...and I guess it hasn't gone unnoticed. So after being
asked to teach, I decided to divulge it all.
I developed some overhead slides that I used during the presentation as visual guidelines for
notes. Wanna see them? I thought some of you might get something out of them. So here they
are (text only - minus the fancy clip-art graphics and all).
FLIPPING DEFINED: The buying and selling of real estate for profit.
TWO TYPES OF FLIPPING:
- Buying Wholesale Property
- Rehabbing if Necessary
- Reselling it on the Retail Market for Profit
- Acquiring Interest in Wholesale Property
- Quickly Reselling Your Interest for Profit
(usually to another investor)
FRAUDULENT FLIPPING :
- Flipping becomes illegal when resale relies on inflated appraisals, fake documents, sales to
"straw" buyers who represent original sellers, and "phantom" second loans
...Peter G. Miller of Realty Times
SNAPSHOT OF RETAILING:
- Usually make larger chunks of money!
- Great Way to Build your REI Business!
- Requires More Time / Patience than Wholesaling.
- Usually Requires Lots of Cash or Financing.
- Harder for Newbie's to Get Started.
SNAPSHOT OF WHOLESALING:
- REQUIRES LITTLE OR NO MONEY!
- QUICK PAYCHECKS! - GET PAID TODAY!
- SKIP CLOSINGS! - GO TO THE MAILBOX!
- LEARN A LOT ABOUT YOUR REI BUSINESS!
- NEWBIES: IT'S THE PERFECT PLACE TO GET STARTED!
- OLD TIMERS: WHAT ABOUT ALL THOSE DEALS YOU TYPICALLY PASS ON?
SNAPSHOT OF FRAUDULENT FLIPPING: (photo of prisoner behind bars along with the word
RECOMMENDED WHOLESALE TOOLKIT
1. Mobile Phone with Voicemail
2. Fax Machine
1. Digital Camera
2. Computer with Internet & Email
3. Call Forwarding Service
4. In Your Car:
- Crow Bar / Big Honkin' Screw Driver
WHOLESALE DEALS WHAT DO THEY REALLY LOOK LIKE?
FOUR NECESSARY INGREDIENTS:
1. Cash Buyers (Investors / Rehabbers)
2. Motivated Sellers
3. "Workable" Situations
4. Marketing / Communication System
- For Your Buyers
- For Motivated Sellers
BASIC WHOLESALE PROCESS OVERVIEW:
1. Find Your Buyers IN ADVANCE if possible.
2. Find a Good Deal or Make It Find You.
3. Do The Numbers
4. Tie It Up Under a "Buying" Contract.
5. Contact Your Buyers About the Deal.
6. Pass the Deal Along for a Referral Fee
- Via "ASSIGNMENT OF CONTRACT"
- Via "SIMULTANEOUS CLOSING"
7. CHA-CHING! OFF TO THE BANK, BABY!
DEVELOPING YOUR BUYERS LIST...
WHERE TO START LOOKING:
1. Local REI Group
2. "We Buy Houses" Ads & Signs
3. Classified Ads Targeting Investors
4. Classified Ads For Your Deals
5. "For Rent" Signs You See
6. Construction / Rehab You See
WHAT TO ASK THEM
- Buying Criteria
- Types of Houses
- Areas of Interest / Disinterest
- Typical Buying Formula
- Contact Info.
THE ELUSIVE MOTIVATED SELLER...
Types of Motivated Sellers:
- Tired Landlords
- Banks / Lenders (REO)
- Moving / Relocation
- Two House Payments
Methods of Finding Motivated Sellers:
1. Direct Mail
2. Driving For Dollars
5. Foreclosure Realtors / MLS
6. ¡§Bird Dogs¡¨
7. Local Newspapers
My Favorite Methods:
1. Direct Mail: The Gift That Keeps On Giving
- Get a Good Letter
- Get a Good Mailing List (buy / compile)
- Be Consistent
- Possible Targets:
* Tired Landlords * NOO
* Vacant Property
* Condemned Property
2. Driving For Dollars: Roll Up Your Sleeves
- More Aggressive, Labor-Intensive Approach
- Yields Higher Response Rate
- Tell Tale Symptoms¡K
- Finding The Owner:
- ONCE YOU'VE FOUND THEM:
* Call Them!
* Mail Them a Letter!
* Mail Them an Offer!
3. Advertising: Consistency is The Key
- Easier, More Passive ¡V BUT ALSO SLOWER
- Bandit Signs
- Business Cards
- Classified Ads
- Flyers On Ugly Houses
A FINAL WORD ABOUT FINDING MOTIVATED SELLERS
MECHANICS OF A GOOD DEAL...
LOW END vs. MIDDLE CLASS vs. UPPER END
* LOWER END HOUSES:
- Typically Your Greatest Volume of Deals
* MIDDLE CLASS HOUSES:
- Typically Your Sweetest Deals
* UPPER END HOUSES:
- Typically You¡¦ll Want to Avoid These for Wholesale Flips
Things to Avoid:
- Skinny Deals
- Total War Zones
- Weird Houses
- No Legitimate "Out" In Your Contract
MY TYPICAL FORMULA:
MAO = ARV X 75% - Est. Closing - Est. Repairs - Min. Buyer Profit - My Profit
MAO = $50,000 (ARV) X 75% (LTV)
- $3,500 (closing) - $5,000 (repairs)
- $10,000 (buyer profit) - My Profit
MECHANICS OF A GOOD DEAL:
1069 Shaw Pl., 38126
- 4br/2ba 1344 sq. ft. living
- $50,000 ARV
- $20,000 Est. Rehab (material & labor)
- $ 5,600 Bought
- $ 6,600 Sold
- $ 1,000 PROFIT
1525 Roosevelt, 38127
- $45,000 ARV
- $ 3,000 Est. Rehab (material & labor)
- $ 25,000 Bought
- $ 26,000 Sold
- $ 1,000 PROFIT
FINAL IMPORTANT THINGS TO REMEMBER!
DON'T BE GREEDY!
- Buy Low - Sell Only Slightly Higher!
- Build Long-Term Relationships!
- Volume Beats Any One Deal!
YOU ARE A PROBLEM SOLVER!
- Focus On Meeting People's Needs First!
ALWAYS WITH INTEGRITY!
- No Deal is EVER Worth Your Reputation!
- Remember the Golden Rule & Practice It Daily!