Understanding A-B-C or 1-2-3 Deals in Real Estate

There's a term in real estate investing called flipping paper.

Flipping paper is buying a property and selling a property on the same day without ever titling the property into your name.

Flipping paper involves two main components.

First, finding an undervalued property for sale and putting it under contract.

Second, finding a buyer for the property and writing a contingency sales contract.

I will give a real world example. A commercial real estate agent that I know listed a large tract of land for sale. On the edge of the land were three homes that had been used for rental properties but were now vacant.

The agent sold the large tract of land to an asphalt company that wanted to build a paving factory. The new buyer was not interested in the three homes, so the real estate agent offered to purchase the three houses.

The agent then offered the three homes to a real estate investor at a price above his purchase but below market value. The investor agreed to purchase the homes with knowledge that a factory will be built nearby. The investor was not discouraged by the factory because he knew that workers will need a place to live.

So the real estate agent attended the closing as the buyer of the three homes and after the first closing, attended the second closing as a seller of the three homes. At the closing, the agent netted $120,000, without ever spending a dime from his pocket.

Often this type of deal is referred to as an A-B-C or 1-2-3 deal. Owner A agrees to sell to buyer B who agrees to sell to buyer C.

ABC and 123 work best with networking. The deals happen quickly and are contingent upon simultaneous transactions.

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