When you think of house flipping, you probably imagine buying a rundown property, rolling up your sleeves, and putting in hours of renovation work before selling it for a profit. This is the traditional house flipping model that most people know. But there’s another approach: paper flipping houses. Paper flipping involves selling the rights to purchase a property, often without even taking ownership of the house. It’s a faster, less risky option for real estate investors.
In this post, we’ll dive into the benefits of paper flipping houses and why you might want to consider it over traditional house flipping.
What is Paper Flipping Houses?
Before we compare the two methods, let’s get clear on what paper flipping actually is. Paper flipping, also known as property wholesaling, is the process of finding a property that’s typically under market value, placing it under contract, and then assigning the contract (the paper) to another buyer for a profit. The key here is that you’re not actually buying or renovating the property; you’re simply flipping (assigning) the contract.
Now, let’s look at the advantages of this approach.
Less Risk and Financial Commitment
One of the biggest benefits of paper flipping houses is that you don’t need to put up large amounts of money. With traditional flipping, you’re responsible for securing financing, covering the down payment, and funding the renovation costs. If the market turns or unforeseen issues come up, you could be left with a house you can’t sell.
With paper flipping, your only financial commitment is typically the costs of marketing to attract buyers and sellers. Think bandit signs, cold calls, and mailers. Although I typically don't collect an earnest money deposit, I do know that there are some wholesalers that have which can be as low as a few hundred dollars. If the deal doesn’t work out, your losses are minimal. This makes paper flipping a far less risky investment strategy.
Faster Turnaround Time
Traditional house flipping requires months of planning, renovations, and inspections before you can sell the property. In contrast, paper flipping houses can be done in a matter of weeks. Once you have a property under contract, you can sell the contract to another investor almost immediately.
This quicker turnaround time means you can potentially complete several paper flips in the time it would take to finish just one traditional flip, leading to quicker profits.
No Hands-On Work
With traditional flipping, you need to manage the renovation process, hire contractors to do the work for you, or even do it yourself. This can be stressful, especially if unexpected issues arise. From dealing with permits to ensuring contractors stick to the schedule, there’s a lot to juggle and manage.
Paper flipping houses eliminates the need for hands-on involvement. You don’t need to lift a hammer, pick out paint colors, or worry about construction delays. Your role is to find a deal, get it under contract, and pass it along to another buyer. For many investors, this is a more appealing and low-stress option.
Access to More Deals
In traditional flipping, you’re limited to properties that you have the capital to buy and renovate. Paper flipping houses opens up a much wider range of opportunities because you don’t need to actually purchase the property. You’re free to focus on finding good deals, regardless of the property's price point or condition.
This allows you to build a pipeline of potential flips and focus on volume, which can significantly increase your profits over time.
Low Barrier to Entry
Let’s face it: traditional house flipping requires a significant amount of capital and experience. If you’re new to real estate, you might not have the resources or knowledge to tackle a major renovation project. Paper flipping houses, on the other hand, is much more accessible to beginners. This is how I got my start and I actually enjoy doing both. Who doesn't love multiple streams of income right?
You can start with little money, no construction experience, and still make a profit. As long as you know how to find deals and connect with buyers, you can succeed in paper flipping. Most importantly, once you're actually able to assign a contract to a buyer, you have a sweet assignment fee waiting for you and all you did was shuffle paper!
Final Thoughts
While traditional house flipping has its place, paper flipping houses offers several key advantages, especially for investors looking to minimize risk and maximize efficiency. By focusing on flipping contracts rather than properties, you can avoid many of the headaches associated with rehabbing a home and still make a solid profit.
If you’re interested in getting started with paper flipping, take the time to educate yourself on how to find deals, network with buyers, and handle contracts. It’s a great way to break into real estate investing without the financial strain or stress of traditional flipping.
The information in this article are the opinion and experience of the author. Due diligence should always be done before investing in real estate.
Comments