Don’t Waste Your Time Reselling and Flipping Properties
I have previously written about making money in the real estate business through buying and holding property to produce long-term income or buying property on a speculative basis for immediate resale or flipping a property. Both of these methods can be effective when used properly but often involve the use of credit and or the funds of an investor/partner in order to acquire the property, make any necessary repairs and hold it until it can be resold. Without the use of a credit line or a partner who has one, these two methods can become virtually impossible.
Making Money in Real Estate Quickly?
There are a few other methods however that can provide income fairly quickly and while these, in all probability, will not produce the kind of revenue as those mentioned above, they can provide funds that re-invested properly can put you on your way to becoming a success in real estate. While neither of these methods is used very often anymore, they are still a very viable option and can be very effective.
To begin you have to understand one very key principle. Any instrument that places the future of a piece of real property under your control is a marketable asset and when worded properly gives the holder of that instrument all the rights and privileges of ownership. That said, it should be understood that while there are as many variations as there are properties and people that have an effect on the way any given document is worded thus making it peculiar to that deal, there are only two basic instruments, a contract, and an option.
First, let’s examine the contract. I can understand that this might be somewhat confusing because a contract is also used to acquire a property to hold or to flip right? Absolutely. What makes it unique in this situation is that there is a clause inserted into the wording of the document giving you, as the holder of the contract. I used the following language specifically ” Purchaser reserves the right to sell, assign or otherwise bargain for his interest in this contract”. These few simple words put the seller on notice that not only might you sell your interest in this contract but that you are also, in all probability, doing it for financial gain.
There are some who might argue that this clause or the simple knowledge that you might sell you contract will likely send the seller packing as they will be made to feel as if they are being taken advantage of or that there is something they don’t know about the transaction. This simply has not been the case in my experience. While I cannot and will not tell you that a circumstance of this nature will not crop up. If your luck is like mine so often is it probably will on the very first deal, but day in and day out I can assure you of a couple of things, the clause can be inserted and the seller will still sign the contract giving you the needed authority and most sellers who want to sell don’t really care who ends up with the property as long as they get their price.
The second method is more blatant and essentially removes all the guesswork from the equation. The option contract is a document specifically prepared for the purpose of taking property under control for a fee and for a specific period of time in order to investigate the likelihood of selling that contract for a profit. Although it might not seem so, in many ways this method can be more effective than a standard contract in that all parties are fully informed going in to the deal and the seller knows upfront that they are selling “the right to investigate the possibilities” which should at least reduce the conservation surrounding that aspect to a minimum, allowing you to move on to the negotiation of the finer points of the deal.
Sales May Very Broadly
The terms and conditions of an option agreement can vary broadly from the amount paid for the option, (please note there does have to be an exchange of money for the document to be legal and binding) to the length of time you will be granted for the fee paid. It is usually a good idea to include language in the agreement giving you the right to extend the term in exchange for payment of an added fee should that additional time be needed to close the deal with your purchaser on the other end.
Some investors who use options, even go as far as advertising that they are in the options business which goes one step further to eliminate any confusion on the sellers part as to what is transpiring. Simply put they know going in that they are looking at an option.
Once you have either a contract with a right to assign clause or an option in place, the next step is to market the asset. As you progress in the business, hopefully, you will build a network of people to whom you market, once this is done it will be much easier to market your product but when just getting started, the sale of an option or assignment of a contract can be tricky.