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How to Flip Real Estate Contracts

Richard Latimer

August 16, 2021

As with many of the other challenges faced in life, the real estate business can be tricky to maneuver. It can be difficult to master tasks successfully, especially as a beginner learning the ropes for the first time. One of the benefits of the real estate business is that it has variety, and with the proper training and dedication anybody can be successful in the real estate business. 

The real estate business offers a variety of different options and choices that can lead to a successful career, and one of those options is flipping real estate contracts. For people looking to invest, flipping contracts is a big attraction. It’s considered by many investors a quick way of making a good profit and has become more and more popular in the real estate industry.

To get to a point where you're making a steady monthly profit in flipping real estate contracts, it takes practice and a bit of prep work beforehand. You’ll want a good knowledge of the real estate market beforehand.

What does it mean to flip real estate contracts?

Flipping real estate contracts is one of the best ways for many beginners to get started in the real estate industry. There is also something called wholesaling which also refers to the effort of flipping a house or flipping a contract but it’s a bit different than house flipping.

With house flipping, it can require good financing and money to put in to flip the house while wholesaling doesn’t require the buyer to put any money in to secure the house.

Instead, the wholesaler's job is to find properties that are up for sale and have been substantially discounted and then finally finding subsequent buyers for them. The main attraction point to both house and contract flipping is to find and secure good deals that are priced under market value. 

Flipping real estate contracts has a lot of great benefits and is a great way for beginner real estate investors to take their first steps in real estate. Here are just a few of many benefits that flipping real estate contracts offer:

  • You need little to no money to get started or to invest in.
  • Taking the steps to learn how to flip real estate contracts are not very difficult.
  • Investing in flipping real estate contracts doesn't have a high level of risk.
  • Investors can make good money at a fast rate which they can use for buying investment properties.
  • You won’t need to obtain a license to begin flipping real estate contracts.

The money you make for flipping real estate contracts has no limit but your income is going to widely depend on the amount of time, work, and effort you put into your practice. The amount of money you end up making from each deal will be a difference in how much the contract takes to buy and how much you sell the contract for. 

Getting started in the real estate business, even in flipping real estate contracts, can be tricky. With the proper training and time, a successful career can blossom. Here are some steps and tricks that can benefit a career in flipping real estate contracts.

Find an investment property to put under contract

Flipping real estate contracts starts with finding those motivated sellers. A motivated seller is someone who needs to sell their home or property hastily due to life's unforeseen circumstances like divorce, job transfers, or even avoids foreclosure.

You can find investment properties on sites like HomeByOwner, FSBO, Craigslist, or a property marketplace. There is also the option of driving around neighborhoods and keeping an eye out for FSBO signs on yards, or even any indicators of run-down or distressed homes. Other ways to find a good deal for an investment property can include:

  • Visiting your local courthouse in search of properties.
  • Attend local real estate networking events as a way of branching out.
  • Use something called ‘bandit signs’ as a way of getting motivated sellers.
  • Team up with your local real estate agent to see if they have any properties up for offer.

Get in touch with a property owner

As soon as a suitable property that can generate a good income is found, the next step to take is to contact the owner of the property. After getting in contact with the owner, you’ll want to be upfront with them and let them know that you're a house flipper/wholesaler.

You should inform any owners about your intentions of flipping the real estate contract. Some owners may be hesitant to the idea of house flipping whether for personal reasons or not having enough information on the topic. You also have the option of signing a contract with the seller without mentioning house flipping or wholesaling.

If you have an available end buyer, you could technically tell the property owner that the buyer you have is a partner. This is a more ambiguous route, and while it’s not illegal, you’ll want to be familiar with any and all house flipping/wholesaling laws to avoid any violations.

Your last step will be to convince the owner of the property to sell the property at a low or discounted price. You may want to do some research or even hire an attorney that is familiar with these real estate transactions to help you put the property under contract.

Establishing property value

One of the only ways to make a successful profit while flipping a house is to put them under a contract that's below the rated market value and price. If you’re looking to buy a home or property listing that’s below marketplace value, you want to make sure you know what the marketplace value is first.

The best way to find out what the marketplace value would be is to find out what similar properties in the area have been sold for in the last 6 months or less.

To get that kind of information, you will want to get in contact with a local real estate agent that has experience buying or selling property in that particular area. Small tip, If you ask the owner of the property what the lowest price is that they would accept and they tell you a number that’s $20,000 or more below marketplace value, they are a highly motivated seller and you are more likely to get the property.

Estimate Repairs

Estimating repairs can be tricky because every house is different and while some houses won’t need very much repair, others will need a lot more. That’s why when you are determining how much to offer for a house or property, you will want to take into account the cost of repairs you will have.

To avoid any trouble that could cause you to miscalculate repairs, you will want to bring a contractor along when you visit the property so they can help inform you of any necessary repairs. When you are doing your walkthrough of the property, look out for the small things like appliances, countertops, cabinets, carpets and floors, paint, and anything else that may look like it will need to be replaced or repaired.

You don’t want to forget the big-ticket items either such as the roof, basement, plumbing, heating and cooling systems, and electrical wiring. Once you have a good rough estimate of all the repairs and their expenses, you can use that information to help you calculate how much to offer to the seller.

Negotiations

How To Flip Real Estate Contracts

Negotiations are an important next step in the process, and while they can be nerve-wracking and stressful, it's important that it runs smoothly to prepare you for finding a buyer. When you begin negotiations you’ll want to keep in mind not only what the repairs will cost but what the property could sell for afterward. To help ease the process of negotiations, here’s a basic formula you can stick to help you calculate your negotiating price:

  • First, you’ll want to compute 75% of the property’s value once repairs are finished.
  • Next, you’ll want to deduct that repair cost.
  • After that you will also want to deduct your personal fee.
  • Lastly, whatever is the remaining amount after these calculations should be your offer.

As soon as you have finished negotiations and agreed on a consensual price, sign a contract for the purchase and give yourself about 30 days to close the real estate deal.

Finding a Buyer

The finding doesn’t have to be stressful, especially since it’s one of your last steps. You will need to find a cash buyer fast because you have the 30-day contract deadline, but using resources and strategies available to you will make the whole process run smoothly and efficiently. There are a few different techniques you could use to move the process along quickly.

  • Firstly, if you have a potential buyers list, you will want to start with that. Contact those potential buyers by call or email and find out if they would be interested.
  • Next, you can list the wholesale property on Craigslist or related sites.
  • You can print flyers and posters that include the property details and distribute them out.
  • Lastly, you can also use your local resources by attending local real estate events so that you can network with potential buyers in a real estate setting.

Easing the process of finding a buyer is all about personal preference and what works best for you. While some prefer to wait to find a buyer until after negotiations, you might find it beneficial to find a buyer earlier in the process.

This all comes down to networking and building a buyers list of real estate investors who will be on the lookout for deals. Having those resources available to you makes the process a lot easier and more efficient, and you’ll know who to contact right away.

Time to close on the investment property

Congratulations! You have reached the last step on a long journey and as time and practice go by, you will improve your skills and craft. This last step is all about closing on your investment property.

You will want to look for a title company that has the experience and understands the process of flipping real estate contracts to help you with closing. Within those few days, that company will do a title search to find out if that property has any liens or encumbrances.

The title company you go with will also take the point of coordinating the sale, getting the payment from your buyer, and then drafting the final settlement. Once the buyer and seller have signed the real estate contract, the deed will be recorded and you will be paid through a wire transfer or a check.

Conclusion

Flipping real estate contracts offers a lot of attractive investing benefits. One benefit of this business includes the fact that real estate contract flipping doesn’t require much money to get you started. This means that flipping real estate contracts can be low-risk, and it’s a great way to get money into your pocket quickly.

Flipping real estate contracts can be a great way of entering the real estate industry and making their successful mark. It’s important to take the time to complete research that will help your success in this business, as well as leaning on the support of other real estate agents and investors as they can teach you a great deal. 

If you are genuinely interested in an entry-level investment strategy, learning how to flip real estate contracts is the perfect opportunity for you. As you start out, there will be difficulties and struggles but everything takes practice. Learning a proven system that also works best for you will benefit you and your success in flipping real estate contracts. 

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