I'm new to the forums for this website, but I've been a lurker for a while. I've been researching ways to become involved in real estate investing, and I have forgotten the term for one of the strategies. What is the term used to describe when a real estate investor finds a property and enters into a contract with the seller with a possible purchase price, but the buyer has time to decide if they want to purchase the property? I think usually the buyer then flips the property to another buyer for more money, but keeps the difference?
The only thing I can think of are Contingency Clauses such as:
- contingent upon financing
- contingent upon inspection
- contingent upon finding a qualified buyer..
Hope this helps :)
You may be speaking about buying a property
"Subject to" the existing loans, or
"Lease with an Option to Purchase" which is just that, you lease the property for a specified period of time, during which you can exercise the Option to Purchase and buy. You do both contracts at the same time, the lease, and then the Option to Purchase Agreement that spells out all the terms.
Welcome to BP! Here's a link for you too Beginners Guide to Investing just in case you haven't read it yet. Also, you will find every subject you can imagine on Podcasts , and of course, posting questions!
And, as you did on this post, always be as specific as possible in the subject line so as to draw in people scanning the forums that know the answer to your question.
The time frame to purchase can be referred to as an inspection period, contingency period (upon financing, title work, home inspection, partners approval, etc etc etc), closing period or can be called some other terms I probably am not thinking of.
When the buyer sells it to another buyer at a higher price it can be done a few ways but wholesaling, flipping and assigning the property to another buyer at a higher price and are the most common used terms.
Hope this helps.
It sounds like you're describing the strategy of wholesaling. You contract with a seller to purchase at a certain price, then line up a buyer for a slightly higher price. You then either use transactional funding to purchase the house and on the same day you close that purchase you close the sale to your buyer...OR...you simply assign the purchase contract you signed with the seller to your buyer with an "assignment fee" added in that you collect when your buyer closes with your seller. Just as @Jared K. mentioned above...the period between when you contract to purchase and when you close is commonly referred to as the "inspection period".
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