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Joyce Dent's Blog

By Joyce Dent | Real Estate Pro in Philadelphia, PA

8 Ways To Flip A Property

There are many ways to “flip” a property and make a profit. When most people think of flipping though, they tend to think of the most common form of flipping - the fix and flip strategy (also known as rehabbing). However, there are several other ways to flip a property and make a profit. Some strategies allow you to earn your profit quickly, while others allow you to earn your profit over time. Whether you’re a veteran or a novice, cash rich or cash poor, credit perfect or credit challenged, there’s a strategy for you.

Here’s a breakdown of 8 flip strategies:


1. Rehab

The rehab strategy is the most common way to flip a property. You buy a bargain property, fix it up, and sell it retail to a buyer who intends to occupy it. Depending on your market, it’s easy to make $15,000 to $40,000 per deal. In some markets, you can make as much as $100,000 on a flip. For this strategy, you must learn what it costs to fix up a property and how to work with contractors. If you have some cash, good credit, and are willing to take on some risk, then this is a good strategy for you.


2. Wholesale

If you’re good at finding bargain properties, instead of fixing up the property yourself you can flip it quickly to a rehabber who will do the work. You usually make a smaller profit than what the rehabber will make, but you earn your money quicker. As the saying goes, “a quick nickel is sometimes better than a slow dime.” If you have limited cash resources, this is an excellent strategy for you. You don’t need to have good credit or take on much risk to wholesale properties.


3. Bird dog

A bird dog obtains information about a potential bargain property and sells it to either a wholesaler or a rehabber for a fee. Bird dogs generally have limited experience and do not have the knowledge or financial means to flip a property. They simply sell information about the deal including the owner’s name, phone number, and address. If you’re looking to make some money while you learn the flipping business, bird dogging is for you. You don’t need any cash or credit, and you don’t incur any risk.


4. Prehab

If you find a bargain property that doesn’t need much work, you can simply sell it to a retail buyer in “as-is” condition. This method is commonly called “prehabbing” because you might clean up the property or make a few repairs before putting it on the market. If the property needs mostly cosmetic repairs, many retail buyers are willing to put in some “sweat equity.” If you have good credit and some available cash, then this is a good strategy for you.


5. Buy, fix, refinance, and lease with an option to buy

You may not want or need your profit immediately. If this is the case, you can buy a property, fix it up, and then refinance it at the new appraised value. If you buy the property at a good price, you should recoup your entire investment (maybe even pocket some cash on a cash-out refinance). Then, you can lease the property with an option to buy. The “tenant-buyer” pays upfront option-money and a premium lease payment. The premium rents should exceed your underlying mortgage payment. The option gives them the right to buy the property in 1-3 years at a pre-determined price. If you have good credit and some available cash, then this is a good strategy for you.


6. Buy, fix, refinance, and sell using a contract for deed

This is a slightly different strategy from technique No. 5. Again, you buy a property, fix it up, and then refinance it at the new appraised value. However, this time you sell the property on a contract for deed (aka land contract, installment land contract, agreement for deed). The buyer makes a down payment (usually larger than option consideration in a lease-option situation) and monthly payments (similar to a mortgage). The monthly payments should exceed your underlying mortgage payment. Although this strategy is similar to No. 5, it is distinctly different from a contractual and legal perspective. If you have good credit and some available cash, then this is a good strategy for you.


7. Buy and lease with an option to buy

This strategy is similar to technique No. 5. However, if the property is a bargain and it doesn’t need much work, you avoid fixing it and immediately lease it with an option to buy. You can recoup some or all of your down payment on the property with the option-consideration. And, the premium rents should exceed your underlying mortgage payment. You will probably achieve less immediate equity than if you rehabbed it and forced appreciation, but you also avoid the hassles associated with fixing up a property. If you have good credit and some available cash, then this is a good strategy for you.


8. Buy and sell using a contract for deed

This strategy is similar to technique No. 6. However, if the property is a bargain and doesn’t need much work, you avoid fixing it and sell the property on a contract for deed. You can recoup some or all of your down payment on the property with the buyer’s down payment. And, the monthly payments should exceed your underlying mortgage payment. You will probably achieve less immediate equity than if you rehabbed it and forced appreciation, but you also avoid the hassles of fixing up the property. If you have good credit and some available cash, then this is a good strategy for you.

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