This is the 3rd post in the series about the Top 10 Ways to Profit from the Foreclosure Food Chain. This post, courtesy of Howard Small and www.foreclose.com, shows you how you can make money in foreclosures as a Flipper.

What is a Flipper?
A flipper is someone who finds foreclosure properties, buys them, then resells them to either home buyers or other investors for profit. Profits can vary significantly, but flippers should expect minimum profits between $5,000 and $20,000. Flippers typically close deals within 30-60 days, which covers the period from the initial purchase to the final settlement.

The primary difference between a flipper and an assigner (Part 2) is that the flipper takes possession of the properties at settlement. Also, unlike a rehabber (Part 4), a flipper does not generally conduct any repairs on the properties and thus resells them in “as-is” condition.

Why Be a Flipper?
Being a flipper is a very effective way to earn excellent cash flow from foreclosure properties. As a flipper, you incur some more risk than an assigner because you take possession of the properties versus just assigning them. However, your reward is much greater because of the increased profits.

How Does a Flipper Do Deals?
A flipper deal begins when you prepare a contract to purchase a property and the seller accepts it. Once the seller accepts (signs) the contract you can arrange settlement, usually within 7-30 days.

You also begin to market the property for resale to home buyers and other investors who are also looking for a good deal. You can advertize the property yourself in the local papers or real estate-related publications or you can leverage the resources of an agent. Once you find a buyer you can arrange the 2^nd and final settlement, usually in 30 days or less.

In this scenario, you should be able to conclude deals within 60 days. If however you take the time to establish a network of buyers who are interested in properties you find, you should be able to conclude deals in much less time.

Financing the Deal
You would need to provide the financing for the deal, since you are taking possession of the property. You would have to submit a deposit (typically $10-$100 for preforeclosure properties) along with the contract to the seller. If you’re purchasing an REO from a lender, the deposit may have to be $1,000 or more.

You would also need a down payment (typically up to 5% of the purchase price) depending on the lender and the type of mortgage financing you negotiate. Finally, you would need to cover the purchaser’s side of the settlement costs, including appraisal fee, discount points, and transfer taxes. Your settlement costs could range up to 2% of the purchase price.

Alternatively, you can do an all cash deal by either using your own money, money you’ve borrowed from your credit lines, funds you’ve obtained from a partner, or financing you’re received from a private lender.

Settlements
Note that as a flipper, you have to participate in two settlements: the first one with the seller (to buy the property) and the second one with your buyer (to resell the property). As described earlier, you would have to cover the purchaser’s costs at the first settlement. At the second settlement, you would have to cover the seller’s costs.

These costs are offset by the significant amount of profits you can make on foreclosure deals. Since you’ll be buying properties for at least 30% - 35% below market, you will be able to cover all of the expenses and still leave big enough chunks of profit to make the deals worthwhile.

Getting Started
This example illustrates how straightforward it is to earn really good cash flow as a flipper. You can close deals within 30-60 days, and you can make tens of thousands of dollars in profit on each deal. You can use your own cash or Other People’s Money (OPM) to finance the deals. If you’re not totally comfortable writing contracts or marketing properties, you can hire an agent to help you. Want to learn even more, get additional details at www.foreclose.com.