How to Structure a Purchase Contract for your Next Fix & Flip
So… you found a property to flip!
That’s the hardest part, so well done!
But, you’re not out of the woods yet. After finding a property, the next big hurdle my students run into is how to structure the contract properly.
In fact, I’ve seen entire deals fall through or get delayed significantly because a few crucial parts weren’t done properly on the contract.
I’m not going to cover the entire contract beginning to end, but I’ll cover some of the more commonly missed aspects.
Structuring Your Contracts Correctly
- Option #1: Your name or company name with “and or assigns” (i.e. “Ryan Wright and or assigns”).
- Option #2: Add an addendum, such as “buyer has right to create new entity for property.”
- Option #3: Purchase the property in the name of your company
Most hard money lenders (Do Hard Money included) only loan money to business entities. This helps avoid some residential regulations and also protects the borrower and the lender from increased liability.
By using those options above, you can use your name and then later assign it to your business entity, if you don’t have one yet. We’ve had students sign their own name to the contracts, only to find out later that they can’t complete the deal because they can’t reassign the contract to their business entity!
In general, flexibility in the purchase name can save you a lot of pain later.
- Don’t write the offer as cash
When you mark your offer as cash, you’re stating that you have all the cash for the deal. For some reason, most real estate coaches will tell you to do this, but it doesn’t make sense to me. Instead, say you’re using private financing or hard money.
- Appraisal deadline: 5-10 business days from acceptance
- Inspection deadline: 10-15 business days from acceptance
- Loan denial: 10-20 business days from acceptance
- Purchase deadline: 10-20 business days from acceptance
There isn’t much to say here other than these numbers have served me well over the past 20 years of completing fix & flips.
Don’t Stop Making Offers!
And one last note – most new real estate investors hesitate to put together offers and write contracts on multiple properties at the same time. But you shouldn’t be! You can back out for any reason. Instead of making one offer, and waiting to see if it pans out, make 10 offers, and one for sure will work out – and then you back out of the others, or wholesale them!
Anyway, contract writing isn’t a part of the process that you should have to worry about… it’s certainly not what budding fix & flippers dream about when imagining their smooth road to a 7-figure empire!
That’s why my students always get access to ALL of my contract templates – not just the purchase contract.
Ready to get complete access to my resources, including my 10 Steps to Profit video series? Click below, answer a few questions, and let’s see how we can help you launch your fix & flip career.