Some investors use a technique called flipping to profit in real estate. Instead of contracting and closing on a property, the investor puts it under contract and then finds another buyer to assign, or transfer, the contract to. The first investor never closes on the property but receives his profit when the buyer he found does.

Successful flippers have a list of buyers who they know are interested in distressed properties. It takes a while to develop a network like that, but once you do, it's definitely worth the effort.

Another Flipping Scenario

It's possible to flip properties that have not yet been built. The investor signs a contract with a developer for a property that's under construction, speculating that when the property is actually built it will be more valuable than it is prior to construction. The important term here is speculation — an educated guess that values will climb. It's just as possible that values will stay the same or decline.

The Risks Involved

There are some obvious risks to flipping. If you can't find a buyer in time to close, you might lose your deposit money, or you could be forced to buy the property unless additional contingencies provide a way out of the contract. You must have a thorough understanding of property values and rehab costs in order to ensure there will be enough mark-up potential when you sell the contract to the new buyer.

Flipping is a fast-moving game that some real-estate investors like to play. If you are good at it, and can take the pace, flipping can pay off in nice profits. But if you're not sure, it might be one type of real-estate investing you'd do best to avoid.