Flipping is the buying of property and then reselling it quickly. Many investors search for under-priced “ugly” houses with the intention of merely adding curb appeal and cosmetic fixes and then selling them for a quick profit. Usually, people think of flipping houses as the only way to make money flipping real estate. However, some investors specialize in other types of real estate such as land or strip malls.

Another strategy, known as Contract Flipping, doesn’t require the buying and selling of the actual property. Oftentimes, at the beginning of a project, a developer offers homes at a reduced cost. Many accept earnest money, and then payment in full is due upon completion of the home prior to moving in. The earnest money gives the buyer the right to purchase at, let’s say, $250,000. If the homes are selling for $320,000 one month before move-in date, then the investor can exercise his option to buy and then, before closing, sell the house to another buyer and pocket the $70,000 profit without owning the actual house. The same strategy can be used even if the home is not new construction.

Double closing or escrow happens when an owner signs over to a dealer a property deed that is placed into escrow. The dealer then signs a deed to a retailer for a higher price and that deed is placed in the same escrow account. Then the retailer signs the bank loan documents making the deal final. At this time the owner receives payment for the negotiated price, usually below market value due to a distressed situation.  The dealer then collects his/her share for locating the property and negotiating the deal.

The Federal Housing Authority (FHA) requires that FHA-insured loan recipients own the property for 90 days to prevent double closing. These loans still work for most investors that rehab properties or wait for property values to rise. Fannie Mae, the company responsible for most residential loans, still allows double closings.