flipping and lenders??
I was wondering if lenders have any problem with flipping properties? When I get a propety under contract does the investor I flip it to use the financing I have or do they use their own? If they use their own it seems like that might make my lender unhappy as they are not making any money on the loan after doing all the paperwork to put it together. Please let me know if I'm way off base here. Matt 
Panner,
If you plan on flipping a property that you have under contract to an investor, it's more than likely that you're going to want to flip it before going to closing. This way, you're not accquiring financing for the property but rather your investor is.
Best of luck,
Vic
So if I don't go to closing how do get my profit out of the deal. I thought you had to set up a simeltaneous closing with me the seller and my buyer and that's when I get paid. If it goes the way you say then back to my initial question. Won't my lender get upset to the fact that they went through all the trouble to get me a loan and now I'm not going to use it?
Panner,
I think you have flipping and Lease Option confused?
Flipping = Finding an investment, going into contract and then assigning that contract to an investor for a fee (ie. $3000). It's a quick n easy way to make cash. You as the flipper wouldn't go to closing at all. You are in it to make quick cash and be rid of the property. Let me give you a scenario:
Let's say there's a rehab house available for purchase (purchas price of $15,000). I talk to the seller, write up the contract and then specify that closing will be 30 days after signing of the contract. (sometimes longer). At this point, during the 30 days, you would find an investor who would be willing to take this project. If he is interested, you would then collect a fee from the investor (ex. $3000). You take the contract and assign it to the investor. It is now the investors responsibility to find financing for the property. Although, the more services you provide (ex. finding financing for the investors) the more you can charge.
From what you are telling me..sounds like a sandwich lease (a lease option strategy). This is where you would go under contract with a seller for a specified period of time (ex. 3 years) and then find a tenant/buyer who would be willing to lease the place for a period of time (ex. 1year) and then at the end of tha tyear, purchase the property. At this point, you would then go and perform a double closing. Buy from seller and then sell to tenant/buyer.
Honestly, at this point...I wouldn't consider the lease/option strategy just yet if i were you. On the other hand, if you are just starting...bird dogging or flipping would be an excellent way to go.
I hope this clears some things up. If not, let me know. You seem to have what a lot of us have had..information overload. I had a bad case a while back. But that cleared up quickly.
Best of luck to you,
Vic
Vic, thanks for your response! I guess my question is when I find my investor and charge the $3000 fee, how to I get that from the investor. do I tell him the house is $18,000 or do I tell him that my finders fee is $3000 and the house is $15,000? I thought I had this all figured out but I seem to be a little confused.
You seem to be too eager and are trying to do more than you need to. One of the great features of flipping a contract is that you DON'T have to worry at all about financing. The only person who needs to worry about that is the end buyer. if you are asking yourself 'how do i get a seller to agree to sell to me unless I show that I have financing?' then you are confusing retail transactions (standard buying and selling like with a Real Estate Agent) with investing transactions. Investors buy specifcally from people who are not that concerned about seeing your financing. It's all about finding a motivated enough seller and putting an offer in front of them that meets then needs they have at that time.
As for how a flip works, Vic did a reat job of describing it here and you can look at some of the articles on this site for further instruction.
[addsig]
OK now I'm really confused!!! I read one of Scott Risters posts and this is basically what it said re: wholesaling. You find a house at a great deal, say $50,000 and the market value is $80,000. Then you write up a contract on the house with an "assign to" which enables you to flip it to your investor. At this point you add say $3000 on to the price of the house which is now $$53,000 and this will take care of the finders fee. Now from what I understand YOU DO go to the closing and this is when you will recieve your check for $3,000. It doesn't make sense that you find a property, put it under contract, find an invester, and this invester is just going to give you a check for $3,000 before the actual closing occurs. The few responses to this post make it seem this simple. If I'm way off track here then please help!!!!
Panner- I think that you are getting your definitions mixed up, or at the very least, the concepts.
Double Closing = Simulatenous Closing
This occurs when you put a motivated seller under *contract* to buy, then sign another contract (with you acting as seller) to either another investor or a homeowner (in this case, usually another investor). You would setup a closing date, submit both contracts, and collect a check from the title company/attorney/whoever you chose to use to close the properties.
Assignment is when you sign a contract with a motivated seller, and then assign your signed contract to another investor, via an Assignment Addendum form. This form indicates the "finder's fee" that you speak of, usually including a non-refundable clause and whatever else you wish to include.
So you see, a double close is basically two purchase contracts submitted at once. Technically, for a period of a few minutes while one deed is filed after another, you technically own the property. In assigning the contract, there is only 1 contract, with the aforementioned Addendum attached as well. That is why on that original purchase you write "and/or assigns". Hope this helps
~Ryan
Ryan, Thanks for your response, it certainly helps me understand this process a little better. I have two questions for you - 1) If you have a double closing will I be responsible for the closing costs on both contracts, just the contract with my buyer, or is that all negotiable? and 2) With the "assign to" contract will the investor I'm flipping the property to know how much I added to the price for my fee? I also have one more question as to what's the best of these two types of deals as far as my net profit and how smooth the closing process will be? Thanks a million for your input as I'm just trying to make sense of everything before I get started!!!! Matt
Matt,
I honestly think you should hold off on flipping a property and educate yourself more on the subject. Most of the answers everyone provided are the basics you should know before flipping a property. You may want to read some more posts and articles on wholesaling or flipping. There is a book for $20 by William Bronchick that will explain most of it to you called "Flipping Properties." You can also pick it up at you local library if they have it.
Tanya
Tanya, Thanks for your response. That's exactly what I'm doing on this website. I'm very new to this and have been asking many questions on this forum. I will be sure to pick up the book you mentioned. do you know of any good home courses that might be worth while? Matt
If you are willing to dish out a little money...Scott Rister has a great course entitled "Instant Cash Wholesaling Houses". It is a very informative and detailed book.
Best of luck,
Vic
Quote:
On 2003-05-11 11:55, panner wrote:
Ryan, Thanks for your response, it certainly helps me understand this process a little better. I have two questions for you - 1) If you have a double closing will I be responsible for the closing costs on both contracts, just the contract with my buyer, or is that all negotiable? and 2) With the "assign to" contract will the investor I'm flipping the property to know how much I added to the price for my fee? I also have one more question as to what's the best of these two types of deals as far as my net profit and how smooth the closing process will be? Thanks a million for your input as I'm just trying to make sense of everything before I get started!!!! Matt <IMG SRC="images/forum/smilies/icon_smile.gif">
Panner:
1. You can contract in the amount of which closing costs you are going to cover. "I agree to cover 50% of all associated closing costs with this property." This applies to both seller and investor contracts. Or you can say that they will cover 100% or you will cover 100% or whatever you want.
2. When assigning, the contracted seller amount will not change. Once you sign for $50k, it stays at $50k. You simply tack on your $3k or whatever assignment fee you wish to collect, spell out the exact amount in the Assignment Addendum, and that's it. The investor purchases the property for the $50k you originally contracted for, and he pays you $3k out of his own pocket, either before or after closing (depending on your negotiating skills ).
That said, depending on what title company you use, you can get some leeway there as well. For instance, the title company I work with allows me to pull the closing costs out of my final profit margin. So, if I contract the seller for $50k, contract the investor for $70k, and figure 2% closing on each purchase contract, and I pay 50% of both, that comes out to roughly $1200 that is taken out of my final check, versus having to come up with the costs upfront. Hope this helps!!
~Ryan