Flipping Houses Explained in Very Technical Real Estate Jargons
Flipping Houses Explained in Very Technical Real Estate Jargons
The truth is flipping houses is harder to explain using very technical real estate jargons. Why? Because all that mumbo-jumbo is all that nothing but mumbo jumbo. This business of investing in real estate is easier discussed in common terms understood even by those who haven't even about mortgage. In essence, it runs on simple steps. What complicates matters is people's unwillingness to try it and determine first-hand whether it indeed works wonders as many investors have already said.
In simplest terms, you flip something when you turn it from one side to the other. You flip a coin, right? You do this with speed. In real estate investing, flipping properties is simply quickly reselling a house. You take it from the seller and give it to the buyer fast.
There are two main forms of flipping houses: wholesaling and rehabbing. In wholesaling houses, the investor and the seller enter a contract to sell the house. The investor will then get the exclusive right to purchase that house within a given period of time. What he will do next is look for a buyer who is interested in that property. He will assign the contract his right to buy the property to the buyer and pocket an assignment fee on closing. Wholesaling houses is also known as assignments and is considered the easiest method of investing in real estate.
In rehabbing, the investor will purchase the property from the seller and quickly resell it to a buyer. However, before the resale is done, the investor implements improvements and repairs on the property. Doing so will increase the value of the property and allow him to take home profits on closing. This form of flipping properties is sometimes called fix and flip because the house is repaired before it is "flipped" to the en buyer. Rehabbers usually get financing from private or hard money lenders.
What makes flipping houses work in today's real estate investing market is the presence of cheap houses that qualify as investment properties. Banks are selling bank owned homes at discount prices. Homeowners struggling to make ends meet and are trying to avoid foreclosure are also settling for much lower amounts that their asking price. A lot of owners could not afford repairs on their properties and would rather sell them cheaply "as is." Some find selling their house the only solution to their financial problems. This unique situation allows investors to purchase or place homes under contract at very low prices and later sell the houses at high prices. Could wholesaling houses and rehabbing be explained in simpler terms?
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