subject: Is Flipping Houses Against The Law? [print this page] Flipping houses is a term widely used in the real estate business to describe the act of buying properties and then quickly selling them for profit. It is usually used interchangeably with wholesaling, which is another method of investing in real estate. To flip houses, real estate investors mostly buy undervalued houses before selling them at a slightly marked up price.
There are two common methods to flip a property: multiple investor flipping and fix and flip. In multiple investors flipping, Investor A will buy a property at a discounted price. Then he will sell that property to Investor B, who will find an end buyer for the property. The end buyer is likely to use the property for residential or investment properties.
Also know as rehabbing, the term fix and flip applies to the purchase, renovations, and eventual sales of an old property. Most investors who are involve in this type of real estate investing usually fix up distressed properties before selling them at a higher price, which is something near the houses full market value.
Although flipping houses is a great way to make money amid these trying times, many people have reservations with using this particular type of real estate investing to make a living. Because of the negative media reports on flipping houses, most people believe that buying investment properties and quickly selling them for profit is against the law.
However, there is absolutely nothing wrong with buying and selling houses. In fact, flipping real estate is the same when you buy, lets say a pair of shoes and then sell it at a higher price. And you dont go to jail by simply selling a pair of shoes at a higher price, now do you?
Flipping houses only becomes illegal when it involves mortgage fraud. Mortgage fraud involves criminal activities such as paying appraisers to inflate the value of a property to get bigger loans, as well as the falsification of documents required in the processing of a loan application. A real estate investor can also get in trouble if he or she lies about a property, which in reality is in bad condition, and sells it to an unsuspecting buyer just to get a loan closed.
As long as investor follows federal and state laws when buying and selling properties, then there is nothing to be afraid. Thus, it would be wise for a real estate investor to keep himself informed about the latest rules and trends in the real estate investing business.
