Flipping Houses For Dummies. Roberts Ralph R.

focusing your efforts on these properties, you quickly discover the ins and outs of locating them and effectively negotiating the price and terms you want. See Chapter 8 for details about foreclosures.

      ❯❯ VA foreclosures: To narrow your scope even further, consider focusing on VA (Veterans Affairs) foreclosures.

      ❯❯ Probate: You can get leads from probate lawyers and the neighborhood grapevine to locate families who need to unload a house in order to settle an estate.

      ❯❯ Divorces: When couples divorce, they’re often stuck with a home that neither of them can afford. By keeping your ears open and letting people know that you buy houses, you can often get first dibs on these homes.

      ❯❯ HUD homes: Working with an agent who specializes in HUD (Department of Housing and Urban Development) homes, you can build a career purchasing these homes at a discount and rehabbing them for quick, profitable sales.

      ❯❯ FSBO (For Sale By Owner): When everyone else is searching the MLS for great deals, you may prefer driving around the neighborhood looking for homes with a For Sale By Owner sign on the front lawn or searching for the ugly duckling on the street and then visiting your county’s Register of Deeds to see who owns it. (MLS stands for Multiple Listing Service – an organization that maintains a database of houses and other real estate for sale or rent. They’re all over the country.)

      ❯❯ Seized homes: Law-enforcement agencies commonly seize property and then have to unload it. By focusing your energy in this area, you can corner the market on seized homes.

      ❯❯ Teardowns: Homes that are beyond hope may still hold opportunities if the price and location are right. Some investors earn a great return by tearing down old homes and building new ones in their place.

      

Don’t try to be a high roller and master everything all at once. Select a niche (foreclosures, probate, divorce, whatever) and work that niche until you achieve success. After you establish yourself in that area, you can add another to expand your operation. Chapter 9 provides more guidance on niche markets. Your niche market can also be a specific area that you farm by becoming an expert in the area and establishing a strong network. Chapter 6 offers additional details on how to effectively farm a neighborhood.

       Flip contracts (or do it all on paper)

      Flipping contracts (also known as pass-throughs) consists of locating a distressed property and then contracting with the homeowner to sell it to an investor. In other words, you earn a finder’s fee by serving as an investor’s bird dog, and you don’t even have to lift a hammer.

      Here’s how it works: You pay the homeowner a deposit, typically $1,000 or 5 percent to 10 percent of the estimated purchase price. In return, you get a purchase contract giving you the right to sell the property to an investor. You then find an investor who’s willing to purchase the property and pay you a fee in excess of the amount you have tied up in the property.

      

This strategy may sound rosy, but I strongly discourage you from flipping contracts. I include the strategy here only because you’re going to hear about it elsewhere, and you should be aware of the high risk, especially the risk of buying from a bird dog. If someone ties up a $100,000 house and wants to sell you her purchase agreement for $5,000, you’re purchasing the house for $100,000 and paying a fee of $5,000. You’re taking all the risk and giving that person $5,000. If it’s such a good deal, you need to analyze it and ask yourself why she’s not flipping the house herself.

       Cook up your own strategy

      Successful investors, whether they invest in real estate or stocks, devise unique strategies based on their personalities, their abilities, and the resources they have at their disposal. If you like to help people and you’re good at dealing with uncomfortable situations, for example, you may want to focus on foreclosures or divorces. If you’re good at primping a house but not so good at rehabbing, consider focusing on homes that require only a little makeup.