Flipping is a legal way of buying property and selling it as quickly as possible with a reasonable profit margin. There are some variants of flipping where it is illegal. Listed below are six legal and one illegal method of property flipping.
Buy, Fix and Flip
This method of flipping is time tested and involves buying a property that needs to be worked on. Then they sell it at a profit of $15 – $50k in a single deal depending on the market conditions.
Buy, Refinance & Lease/Option
This method works on the principle of leasing the property rather than selling it. The mortgage amount is covered by the lease or rent amount received from the buyers.
Buy & Flip “As Is”
This method is called so because of selling the property in the same condition as it was purchased without any repairs being completed done. This method will work in locales where the real estate market is hot.
Wholesale
The method of buying a property cheap and selling it (normally to an investor) with just a few thousand dollars as profit margin is known as Wholesale.
Pre-Construction
This method involves entering into a futures contract, while a property is under construction and then selling it after the construction is complete. There is a high risk factor of losing money in this method.
Scouting
Scouting is a method where one acts as an information gatherer to find hot property information and then sells that information to earn some commission.
Illegal Flipping
This method involves buying cheap property, making shoddy renovations and selling it at inflated prices. In such cases, the appraiser, investor and mortgage broker conspire with fake documents to close the deal. This method is illegal, and could lead to incarceration.