There are many ways to flip property. Popular television shows spotlight fixer-uppers, diamonds in the rough needing only paint, carpet, counters, cabinet doors, appliances, landscaping, and the moving of a few walls. While it is true that the single project, big-payoff flip falls into this category, this type of flip has the most risk and is the least realistic option for most people. On the other hand, it is really hard to make an interesting one hour television show out of people making money simply by cleaning up dirty houses and selling them.
Here are some of the more popular flipping strategies. Some require no cash and no credit. Some have little risk, except the loss of a very small amount of money and your time.
1. The television flip. Buy a house, fix it up to increase its value by a lot, and sell it.
2. The homeowner flip. Buy a house as your personal residence, fix it up to increase its value, and sell it after two years. Singles can make up to a $250,000 profit and married couples can make up to a $500,000 profit, and pay no taxes on this profit at all under current tax law.
3. The housekeeper flip. Buy a house, clean it up to increase its value a little bit, and sell it.
4. The market rent flip. Buy a rental house with rents that are significantly below market rates, raise the rent, and sell it.
5. The vacancy rate. Buy a vacant rental house, put a tenant in place, and sell it.
6. The tenant flip. Rent a house on a lease with a purchase value moderately, and then sell your option (this flip technique requires little cash and no credit).
7. The scrape flip. Buy property with an ugly, barely usable building, bulldoze the building, and level the lot. Then, sell the vacant lot.
8. The option flip. Buy an option on a piece of property, you pay a small amount to hold the right to buy property but not the obligation to buy it, and then sell your option. (There is more detailed information on this type of flip in Chapter 4 on options.)
9. The reservation flip. Sign contracts to buy property in a booming market and then hope you can sell your contract to someone else, at a profit, before you have to be at the closing table with your purchase money. (It is called a reservation flip because this is usually done with reservations for condos under construction.)
10. The foreclosure owner flip. Buy property at below-market prices from sellers in economic difficulty and then resell. I include in this category reluctant owners, like banks that have already foreclosed on property. While a bank does not need the money to pay the electric bill, it is still in economic distress relative to the property because it has economic pressures to sell the property as quickly as possible to cut its losses.
11. The under-market flip. Buy or option property from owners who seriously undervalue their property and then sell it.
12. The parcel flip. Buy large parcels of property and then break them up into smaller parcels that sell at a larger peracre or per-square-foot price.
13. The assemblage flip. Option very small parcels of property that are all next to each other and then sell them all in one large parcel.
14. The scout. Find property for other people to flip and earn a flat fee or a minor percentage of the profit.