Flipping Real Estate

Selling your Rental Property Investment

Flipping real estate was the hottest topic on home improvement TV for the last 10 years. Many people who had never invested in real estate thought that they could just buy a property, rehab it and sell it for huge profits. Some people in hot markets did just that.

But for many people flipping real estate turned into a nightmare as they underestimated the time and money needed to quickly turn a property around. Even professional flippers run into problems that did not turn up before they purchased the property and do not make money on every property.

My version of the real estate flip is the slow version. I tried the "Flip this house" version and found that carrying costs were too high in an area that takes 60 days to close a house once a contract is signed. Unless you sold the house the day you completed the rehab, it was nearly impossible to justify a flip. But I can get a tenant in a house within two weeks of completing the repairs using my Rent to Own strategy. So the slow flip was born.

So how do you get money out of your property? Actually, the best way is not to sell it.

The best real estate sales strategy is to keep renting the property and refinance it.

While this may be too slow for those professionals that want to flip two houses a month, it works pretty well for those who are interested in building a portfolio of property that cash flows. The best part of refinancing is that you get your money and do not have to pay any taxes (yes, ultimately you always have to pay taxes on your profit, but by refinancing you kick the dog down the road).

The second way to get money out of a property without paying taxes is to do a 1031 Property Exchange. A 1031 exchanges allows you to sell and buy "like-kind" property without paying taxes. Both types of property must be for business.

A third way to get rid of a rental property investment is by selling it through a "Land Contract" type of financing. That is, you finance the deal to the buyer.

Finally, you can flip your property to either another investor or to a homeowner that refinances it and gives you all of the cash. A tenant-buyer in a rent to own scenario is best for this. Investors usually try to hard to buy at a discount. Using a Realtor to sell your house forfeits the commission (5-8% of the sales price) and you have to consider carrying costs while the property is on the market. By selling directly to a tenant-buyer I maximize what I keep, there are no holding costs and tenant-buyers almost always pay top dollar because they are motivated buyers.

If you want to sell it yourself try a site like ForSaleByOwner

The best method of flipping real estate? The slow flip via a rent to own strategy

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