Common Exit Strategies When Wholesaling and Flipping Properties

When wholesaling and flipping properties, it is important to determine your exit strategies. As you may know, it is imperative for a real estate investor to identify how he is going to sell a property before making a final decision to buy from a seller. It is because knowing your exit strategy can help you determine how much money you’re going to earn from the property.

One of most common exit strategies used by flippers and wholesalers is contract assignment. Like the name implies, an assignment of contract basically means that the investor is selling his right to buy the property to another person. Then, the former will replace his name on the contract with that of his end buyer’s and get an assignment fee.

According to real estate veterans, any contract to purchase real estate is assignable. You do not have to write “and/or assigns” after the buyer’s name whenever you’re going to wholesale property. There is, however, an exemption to the rule. A contract cannot be assigned if it is clearly stated in the document that the initial buyer (in this case, the investor) is not allowed to transfer his right to purchase the property to another person. This is the reason why it is very important to carefully read the contracts that you are using to wholesale or flip a property.

Doing a double closing is another method used when flipping properties. In a double closing, the investor actually purchases the house and takes title to the property before selling it later on. This exit strategy is mostly used by investors when wholesaling banks owned homes or REOs (real estate owned). As you may know, an assignment of contract doesn’t usually work on properties owned by lenders. It is because most of these financial institutions have an addendum or stipulations on their contracts that prohibit such a practice.

One of the disadvantages of doing a double close to flip a house is that you are required to bring some cash to the closing table. Because you are technically buying the property from the bank, you will surely need some funds to close the initial deal. If you don’t have cash, don’t fret. If you have already found an end buyer for the property, you can use his or her money to buy the REO from the bank.

 

 

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