This is the technique that people are most familiar with. It is the buy low - sell high strategy. It has a lot of names. Some people refer to this as “flipping”
properties or "wholesaling and retailing.” Another common term is the "fixer-upper business” or dealing in “Junkers”. It is a popular way to invest because it is easy for people to understand and many have some experience with their own homes, families, and friends.

The premise is simple in theory. Buy a property at a discounted, distressed price (low), and then resell the property to an end user or buyer for a greater price to make a profit. You can sell to another investor (wholesale), or an owner occupant (retail) for more than you paid. Just don't forget to include all of your costs, for example: purchase costs, remodel/fix up expenses, interest, holding, resale costs, etc. all factored in to determine your profit. If you sold it for more, you make money and smile all the way to the bank. This section will give you some of the essential tools necessary to make money not only in this strategy, but in the others as well. Even if you plan to focus on the other strategies, we recommend you read through this guide to understand the principles of buying wholesale. I will conclude with some real-life examples, both good and bad, so you can better determine if this type of investment strategy is for you.

Depending on the condition of the property you purchase, it may or may not need work to resell. There are several tracks that you can run on with this strategy. The principles we discuss hold true for all types of properties, single-family homes, condominiums, fourplexes, apartment buildings, and even commercial property. Finding the type of deals that work for you, in your given situation, is critical. In other words, you shouldn't plan on a major fixer-upper that needs a ton of work if you need to turn it in 30 days to a retail home buyer, unless you know what you are doing. I know many part-time investors who have made a ton of money wholesaling and retailing just a few deals each year. I also know of others that do 20 deals or more in a month. Neither option is better. The direction you chose largely depends on your goals.

As we discuss some of the examples in this guide, you will notice that they include lease options, seller financing, and selling paper. This happens because as investors become more familiar with the business, they often combine strategies to achieve the desired result. What clearly starts out as a quick flip to another investor for an assignment fee evolves into a lease-option. This happens because of the moving variables involved in doing a deal. The buy/sell process is somewhat fluid and staying open to options in a deal may greatly enhance your profit potential. For this reason it is important to realize that you are just beginning your education process in creative real estate. If you do it right, you will always be learning—as we are. We also make mistakes. We simply move on, and in the end hope to win more than lose. If you adopt a similar mindset, you
too will be open to more opportunities as they present themselves.  Let’s talk about wholesaling and retailing in more detail.

BUY WHOLESALE, OR DON'T BUY! There are two main aspects to real estate wholesaling, price and speed. Since you make your money in real estate when you buy, much of this section focuses on how to buy right. If you buy right, you can choose your exit strategy, wholesale or retail. In addition to the price, you really want the property sold as soon as you buy it. The key to the whole process is to minimize your holding costs and financing requirements. You do that by moving the property quickly, hence the term 'flipping.' In buying properties wholesale, in most markets, you should try to purchase at least 25-40 percent below retail market value. This discount will vary greatly depending on if you are in a sellers or a buyers market. Really hot, fast moving markets are tough to get steep discounts. You can still find deals, but they move quickly. If you make the right wholesale purchase, you should be able to resale it immediately in a matter of days. Your objective in buying property wholesale is to buy it at a steep discount and then quickly turn it to another discount buyer at a wholesale price giving them room to make some money. Typically you sell at 15-25 percent under retail, more if the market is slow. You may earn a finder’s fee or  assignment fee of anywhere from a few thousand dollars to tens of thousands, depending on the type of deal. (See the case study later in this guide.) In order to buy a property wholesale you must have several things working for you:

1. A motivated seller
2. The ability to close the deal now
3. Knowledge of current values
4. Networking to find the deals

For those more traditionally minded, networking is a very powerful and effective tool. You can work through real estate agents, brokers, friends, friends of friends, anyone who will listen to you. The more people who know that you will buy properties, the more opportunities that will come to you.

If you successfully purchase a home at wholesale, ask them if they know anyone else who is trying to or wants to sell a property. When you find a good buyer, ask them if they know others in the market, or if they know other properties for sale. Ask, ask, ask. The more you ask, the more leads you will build, both buyers and sellers. This process is crucial to your long-term success as an investor. There are many ways to find the deals you want, but there is no such thing as a 'best' way. If you focus only on one avenue of networking, you will be missing many other opportunities. They key is to network wherever you are. Never turn off your prospecting machine. Smart investors know they can always wholesale good deals, even if they are currently out of the market. Here are some other ideas to find buyers and sellers:




Once you have a prospect, you need to evaluate their motivation and flexibility. The property evaluation form below is a good tool. You first interview the seller to see if there is sufficient motivation and flexibility, then you 'interview' the property to deter-mine what repairs are necessary. The information collected on the property evaluation form is the same type of information collected for you by the On demand Personal Assistant or in the pre-screened lead database.

You need to ask these questions of a seller to gather enough information to formulate an offer. This information will be useful regardless of the type of
deal you are trying to put together. This information helps you determine not only your purchase strategy, but your exit strategy as well. You need to know what your exit target and options are (always have more than one exit option). We'll discuss exit strategies in more detail later in this section. Determine What to Offer Once you find a Seller and a property that looks promising, the next step is to determine what you want to offer. The basic calculation is simple and straightforward.

1.    Determine the market value of the subject property after all repairs are completed. For this example, we'll assume $100,000.

2.    Subtract your profit target, generally 15-20 percent which is $20,000 in our example.

3.    Subtract holding costs/contingency. We'll say six month's interest which works out to $5,000.

4.    Subtract estimated repair costs of $10,000.

5.    Subtract selling costs of seven percent for Realtor commission. Based on the $100,000 market value, this is $7,000.

6.    The final offer price is whatever is left. In this case, $58,000.

The key is to determine an objective market value of the property. There are several common methods:

• Income Approach.
• Market Approach.
• Replacement Value.

They each have their limitations. Typically an appraisal will determine value using one or more of these approaches. But be careful. What a property appraises for is not necessarily what a property will sell for. When working with residential properties for investment purposes, we believe the market approach is the most reliable. The market approach uses comparable sales data from similar properties to determine the value. However, there are many, many variables at play. Valuating property is subjective at best. I have had $100,000 property appraised by 2 different appraisers using almost the same comparable sales data. The resulting appraisals were $20,000 apart. It's amazing.

You need to determine values that, based on your best evaluating and professional advice, you feel will be obtainable when you finish the rehabilitation and put the property on the market. I can’t tell you how many times I have bought property, done a comparative market analysis (CMA) and then, three months later seen the value drop by 20 per-cent. (I am sitting on five rentals right now.) The point here is not to discourage you, but be realistic. If you are in a declining or a flat market, be ultra conservative. A couple sales in an area can pull your comps down significantly. If you are cutting your profit to 10 percent and the market moves against you 10 percent, you just shot yourself in the foot and went to a very expensive seminar.

It is better to pass on the deal to begin with. Determining market value is a best guess, but be honest in this evaluation and don’t change the number later (unless you are moving it down). As you evaluate the deal, it is often a very real temptation even for experienced investors to manipulate the numbers when you really like a property. The following scenario is all too common, for new and experienced investors.

EXAMPLE:
As you do the evaluation, the deal looks a little tight. Instead of passing on the shorter profit mar-gin, you start inflating the price you think you can sell it for. Suddenly you think you can get $110,000 (10,000 more then all the other sales) because you are going to make this house nicer then all the other houses. Big mistake. If everything else is selling for $100,000, you sell for $95,000, still make it nice, and move it fast. I am not saying don’t get all the money out of your deals, just be realistic. Don’t be above the market, at least not on your first few deals. You can go there when you get more experienced. I have sold property for more than asking price in a flat market by offering terms or by assisting people with obtaining their financing, but I didn’t do it on my first deal.

ESTIMATING MARKET VALUE
The best way to determine Market value is to do a (CMA) Comparative Market Analysis CMA should use SOLD comparables only and should be based on the following:


Comp A $140,000 2400 sq feet Average Condition
Comp B $152,000 2800 sq feet Average
Comp C $145,000 2400 sq feet Excellent
Subject $_________ 2,200 Average Condition Probably $132,000 - $138,000 range realistically.

You can certainly ask more, but base your numbers on market facts.