Strategy Flipping

REISkills.com Training Module: The Art of the Flip

Instructor: Brian Gibbons
Topic: Flipping Real Estate: Purchase Contracts vs. Options

Introduction: The Zero-Money, Zero-Credit Strategy

Welcome, investors. The dream of making money in real estate without using your own cash, credit, or qualifying for a bank loan is not a fantasy—it’s a flipping strategy. This module will break down the two most powerful techniques to achieve this: using a Purchase Agreement or an Option Agreement. Your goal isn’t to become a long-term landlord; it’s to be the crucial middleperson who connects a motivated seller with a ready buyer and collects a fee for doing so.

Chapter 1: The Foundation of Flipping

Core Concept: You control a property with a contract, then sell that contractual right to a buyer for a profit. You never own the property long-term, and you use the end-buyer’s funds to complete the purchase.

Your Superpower: Equitable Interest
When you sign a valid contract to purchase a property, you don’t own it yet, but you hold an “equitable interest.” This is a legally recognized right that you can sell, assign, or option to another party. This is the entire basis of flipping.

Chapter 2: The Two Primary Flipping Methods

 

Method 1: The Assignment of Contract (Wholesaling)

  • What it is: You secure a property under a purchase agreement. You then find a buyer and “assign” your entire position in the contract to them. They pay you an assignment fee for the right to step into your shoes and close on the property.
  • The Money: Your profit is the flat assignment fee. The buyer brings the funds to close directly with the original seller. You are not the buyer or the seller at the closing table.
  • Pro Tip: Always include an “and/or assigns” clause in your purchase contract. This explicitly gives you the right to transfer the contract to another buyer.

Method 2: The Double Closing (Simultaneous Close)

  • What it is: You schedule two closings: one where you buy the property from the seller, and immediately afterward, one where you sell the property to your end-buyer.
  • The Money Flow: The title company or closing agent uses the funds from your buyer’s closing to fund your purchase from the seller. Your profit—the difference between your low purchase price and your higher sale price—is wired or handed to you as a check at closing.
  • Why it’s “Simultaneous”: The two transactions happen back-to-back, often within minutes. You take title for a matter of moments.

Chapter 3: The Smarter, Safer Way: The Option Agreement

A straight option is the ultimate tool for risk-free flipping.

  • What it is: You pay the seller an option fee for the right, but not the obligation, to buy their property at a set price within a specific time frame.
  • Why it’s Superior to a Purchase Contract in Some Cases:
    • No Obligation: If you can’t find a buyer, you are not forced to close. You simply walk away, losing only your small option fee.
    • Less Risk: It completely eliminates the risk of being sued for specific performance or losing a large earnest money deposit.
    • Control with Safety: You control the property just as effectively as with a purchase contract but with a safety net.
  • How You Profit: Identical to the methods above. You can either:
  1. Assign the Option:Sell your right to purchase to another buyer for a fee.
  2. Execute a Double Closing:Exercise the option and simultaneously close with your end-buyer.

Brian’s Key Insight: “Use a Purchase Agreement when you are 90%+ confident you have a buyer. Use an Option Agreement when you’re still testing the market or dealing with a flexible, motivated seller. It’s your insurance policy.”

Chapter 4: The Pillars of a Successful Flip

  1. The Buyers List: Your Most Valuable Asset

Flipping is a sales business. Your success is directly proportional to the size and quality of your buyers list.

  • Action Step: Start building your list TODAY. Network with landlords, rehabbers, and other investors. When you have a property under contract, you should be calling your list, not starting from zero.
  1. The Non-Negotiable: A Backup Exit Strategy

Hope is not a strategy. What happens if your buyer falls through?

  • The Hard Money Backup Plan: Have a private or hard money lender lined up who can fund the purchase quickly. This allows you to still close, own the asset, and then market it for sale (now as the actual owner) without breaching your contract and ruining your reputation.
  • The Option Advantage: This is where an option agreement shines—it is the ultimate backup plan, built-in.

Action Plan & To-Do List

  1. Draft Your Contracts: Work with a real estate attorney to create a purchase contract with an “and/or assigns” clause and a standard option agreement.
  2. Start Building Your Buyers List: Create a spreadsheet and add 5 new potential buyers this week.
  3. Identify Motivated Sellers: Drive for dollars, search online markets, and network for off-market deals.
  4. Line Up Backup Funding: Research and connect with 3 local hard money lenders. Understand their terms.
  5. Find Your First Deal: Analyze deals based on the After Repair Value (ARV) and what an end-buyer would pay, not what you like.

Final Thought from Brian:

Flipping is about solving problems.

You solve the seller’s problem (needing to sell quickly/as-is) and you solve the buyer’s problem (finding a good deal).

Your fee is the reward for being the solution.

Now go out and create some win-win-win situations.

REISkills.com – Equipping Investors for Success.

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