What to Do with the House Once You Own It

Before you purchase a piece of property, know what you're going to do with it. You have three basic choices: (1) You can fix it up and keep it as a rental for long-term cash flow and appreciation (see Chapters 10 and 11); (2) you can flip it as is to another investor for a quick profit; or (3) you can rehab and sell it. Whatever you plan to do, think what the worst-case scenario is and make sure you can deal with it before you move forward.

There is no shortage of investors out there looking to buy run-down properties, but they either don't know how to find them or they aren't willing to do the work necessary to find them. Many are part-time investors who hold full-time jobs and may have cash to invest and the resources to rehab a property, but they just don't have time to find properties, negotiate with owners, and make deals. Many are landlords looking for properties to fix up and hold; they prefer to spend their time on rehabbing and property management, not on looking for deals. When you provide them with good deals, everybody wins—the original owner of the problem property, you, and the investor you sell to. Once you establish yourself as a deal finder, you'll have investors lining up to take these wholesale properties off your hands. Lester Theiss, one of my students from Missouri, flipped eight wholesale properties in one year for a $122,000 profit—and never took title to any of them.

If you're going to flip the property, you can either assign the contract or you can do a double (or simultaneous) closing.

Assigning the contract means essentially that you sell your rights under the contract to someone else for a fee. That person then takes your original contract and the assignment of contract agreement to a title company to close the deal. When you assign a contract, you never own the property; you just make a profit on it. (See sample assignment of contract in Figure 4.2.)

Assignment of Contract

FOR VALUE RECEIVED, _("Assignor") [your name/company] assigns and transfers to_

("Assignee") [your buyer's name] all rights, title and interest held by the

Assignor to the_[title of contract executed between you or your company and original seller] regarding certain real property located at _ ("Contract"). The

Contract shall be assigned for the amount of_($ .00)

to be paid at the date of closing by Assignee to Assignor ("Assignment Fee"). Upon execution of this Assignment of Contract, Assignee shall pay to Assignor a good faith nonrefundable deposit in the amount of _($ .00) ("Deposit"). The Deposit shall be applied towards payment of the Assignment Fee to be paid at the date of closing by Assignee to Assignor.

Assignee hereby accepts all rights and obligations of the Assignor under the Contract.

This Assignment of Contract shall be binding upon and inure to the benefit of the parties hereto.

Signed this . Assignor day of

Print Name: Assignee

Print Name:

The amount you get for assigning a contract can be anywhere from 15 to 30 percent of the as-is value of the property. Get half in certified funds as nonrefundable earnest money when you execute the assignment agreement; you'll get the remainder plus a refund of your earnest money at closing.

As an alternative to assigning the contract, you may decide to do a double closing, which means you actually buy the property and then sell it in a simultaneous transaction. This lets you use the new buyer's money to pay the original seller. It sounds complicated, but the title company handles all of it for you.

Some title companies won't do double closings, but plenty will. It's really a good deal for them, because they get paid twice on basically the same transaction. If your title company resists doing a double closing, find another one.

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