Real Estate Investment Tips for Beginners

You don’t have to own a property to profit from it
There are two types of quick-sale real estate investors: retailers and dealers. Retailers buy properties outright and sell them for a quick profit. Their risk is highest, but so is their potential reward. Retailers typically need substantial cash for a down payment and at least decent credit.

Dealers, by contrast, buy and sell contracts, not properties. They find bargain properties and sign purchase contracts with their sellers. Dealers then sell these purchase contracts to retailers, making a solid profit in the process. This is known as “assignment of contract.”
Usually, the only cash required is the earnest money to secure the deal. A good dealer can then flip the contract for a quick $1,000 to $3,000 without ever taking possession of the deed.

Use a double closing for greater profit potential
A double closing allows a dealer to earn a higher profit margin than an assignment of contract. With an assignment of contract, there is always potential that the deal will ultimately fall through.

The dealer is protected because she has already received her proceeds from the sale of the contract. But the retailer who buys the contract is wary of the deal falling through and will factor it into the price he is willing to pay.
With a double closing, the dealer assumes more risk because if the deal falls through, she receives nothing. However, with this greater risk comes a greater reward.

A double closing begins with the dealer signing a purchase contract with the property owner. Then the dealer signs a contract with the retailer, in which the retailer agrees to buy the property from the dealer at a higher price and deposits that amount in escrow. The property owner signs the deed to the dealer, who then signs it to the retailer.

The retailer then signs the loan documents, and the process is complete–the property owner is paid his asking price, and the dealer is paid the difference.

Be a scout–no cash or credit required
Scouts are a third type of real estate “flipper.” Instead of flipping actual properties or contracts, scouts flip information. Scouts face even less risk than dealers and have almost no cash or credit concerns. They simply gather information about distressed properties and sell it to interested dealers and retailers.

In effect, scouts do the dirty work for real estate investors, and investors are willing to pay them handsomely for doing it. Typically a scout will gather the following data on a potential deal:
i) The owner’s name and contact information
ii) The asking price
iii) Information about the mortgage and whether payments are current
iv) Outstanding liens on the property
v) A photograph of the house
vi) Pertinent information about the owner’s motivation to sell (i.e. is he in the middle of a divorce, foreclosure, job transfer, etc.)