How To Flip Real Estate Contracts

Flipping real estate contracts, often called contract assignment or wholesaling, is a simple way to make money in real estate without buying properties yourself. Instead of purchasing a home, you find a property for sale at a low price, get it under contract, and then sell that contract to someone else for a higher price. This guide will walk you through the basics of flipping real estate contracts in easy-to-understand terms, so you can get started even if you’re new to this.

What is Real Estate Contract Flipping?

Flipping real estate contracts is different from flipping houses. Instead of buying a property, fixing it up, and then selling it, you’re simply selling your right to buy a property to another person. You earn money by adding a fee, called an assignment fee, to the contract when you sell it. This method is popular because it doesn’t require much money upfront, and you don’t need to worry about fixing up the property.

Finding a Property to Flip

The first step is to find a property that’s being sold at a good price, often by someone who needs to sell quickly. These sellers might be facing foreclosure, tired of managing a rental property, or in a hurry to move for personal reasons. You can find these properties by talking to people in real estate, sending letters to homeowners, searching online, or working with real estate agents who know about off-market deals.

Negotiating the Contract

Once you find a property, the next step is to negotiate a purchase contract with the seller. Make sure the contract includes a special clause that lets you transfer, or "assign," the contract to another buyer. This clause is what allows you to flip the contract without actually buying the property. You’ll also need to agree on a price with the seller that leaves room for you to add your assignment fee and still make the deal attractive to the next buyer.

Finding a Buyer

After you have the property under contract, the next step is finding someone to buy it from you. This buyer is usually an investor looking for a good deal on a property they can rent out or fix up and sell. You can find buyers by networking with other investors, attending real estate meetups, or advertising the deal online. The goal is to find a buyer quickly so you can close the deal and get paid.

Assigning the Contract

Once you have a buyer, you’ll assign the contract to them. This means you’re selling your right to buy the property to the new buyer. They will pay you an assignment fee for transferring the contract. You’ll need to sign an assignment agreement that spells out the terms, including how much the buyer will pay you and when the deal will close. This agreement officially transfers the contract from you to the new buyer.

Closing the Deal

The final step is closing the deal. The buyer will complete the purchase directly with the seller, using the contract you originally negotiated. You’ll receive your assignment fee at closing, usually through a title company or real estate attorney who handles the transaction. Once the sale is complete, the buyer owns the property, and you walk away with your profit.

Tips for Success

• Know Your Market: It’s important to understand the real estate market in your area. This will help you find good deals and know what buyers want.
• Build Relationships: Networking with real estate agents, investors, and other professionals can help you find deals and buyers more easily.
• Clear Contracts: Make sure your contracts are easy to understand and legally sound. If you’re unsure, it’s smart to talk to a real estate attorney.
• Move Quickly: Good deals can go fast, so be ready to act quickly when you find a property that fits your criteria.

Risks to Consider

Flipping real estate contracts can be profitable, but there are risks. If you can’t find a buyer in time, you might end up stuck with a contract you can’t sell. Some states have specific laws about assigning contracts, so it’s important to know the rules where you live. Not all sellers or buyers understand how this process works, so clear communication is key to avoiding problems.

Flipping real estate contracts is a way to make money in real estate without much upfront investment. By following these steps, you can start working in this niche market and build a successful business in real estate.