House flipping is a perfectly legal way to make some additional income, if done correctly that is. Many people who are unfamiliar with house flipping tend to think that it is an illegal “get rich quick” scheme to take advantage of other people, but they are simply unaware of the legal flipping methods. Unlike illegal flipping, the legal form takes a lot of time, money and effort, and is a perfectly ethical way to make a profit.
LEGAL HOUSE FLIPPING
With legal house flipping, a real estate investor purchases a fixer upper. They typically work with a contractor to fix up the home and bring it up to code. Their end goal of fixing and flipping the home is to make it more attractive to potential buyers. Once the home is ready to put on the market, the real estate investor looks for a buyer who is interested in buying the newly remodeled home.
In this situation both parties win, the buyer gets a beautiful new home and the investor makes a profit off of their hard work. Going about house flipping in this way is the legal way to do so, and many people make an honest living like this.
ILLEGAL HOUSE FLIPPING
Illegal house flipping, more commonly known as property flipping, is a fraudulent route that is tempting to many people. House flipping becomes illegal when an investor purchases a home and then resells it soon after for a rate that’s been artificially inflated. These flips generally involve a fake appraisal that indicates that renovations have been made, when in reality the renovations were never made or only minor cosmetic changes were completed. In this situation the buyer is tricked into buying a house that is in poor condition for a price that is much higher than the home’s true value. The investor is able to make a large chunk of money from doing very little, if any, work.
Signs of Illegal House Flipping
Artificially inflating home values
Falsifying documentation or loan documents
Finding unqualified buyers to purchase homes they can’t afford and giving them money under the table to pay for it
Lying about a home’s worth on paper
If you are still concerned about the legality of house flipping, Real Estate Elevated can teach you all of the best practices you need to know for flipping houses. If you have a dream of becoming an honest real estate investor, we fully encourage you to become familiar with the methods to flip houses legally.
For more answers to frequently asked questions, visit the Real Estate Elevated FAQ.