Blowing up real estate or renovating paper?

Flipping real estate isn’t for everyone, but it’s the fastest way to make money in the real estate business. Almost everyone has heard of someone who buys a “run-down” house for a good price well below market value, fixes it up, and sells it for a fair market price. Throwing in a “fixer top” is definitely a way to make a reasonably quick profit. I know a few people who do it this way, but they are more into the contractor business and renovations than the investor mindset.

Some of these “top fix” properties are in need of extensive repair and will require electrical work, carpentry work, etc. If the investor gets involved and does some or all of this work, then there could be enough profit there, but if the investor hires the required labor, the profits could quickly be eaten away. For this type of real estate investment, the purchase price must be heavily discounted and would typically be somewhere in the foreclosure stage.

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

Using this technique won’t even require you to put your name in the title. The profits will generally be less than the top investor who needs repairs, but it involves a lot less work and the whole process is a lot quicker. An investor in need of repairs would not be happy with making a few thousand dollars profit for a few months of work on renovations, but an investor who can trade a contract for a few hours or days of work would be.

Avoid disclosing your earnings to the new buyer by using a double closing.
After making a good deal and changing a contract that involves a hefty profit, you may not want all these details revealed to your buyer. The solution is a double closing, transferring ownership to you initially, then immediately reselling it in the same attorney’s office just an hour later to your buyer.

There’s a catch here and that’s a double set of closing costs, so you’d have to weigh that up 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 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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