Property Flipping: The Good, the Bad and the Ugly

Posted on: January 21, 2011

Categories: Buy, Fix, How To Sell, Investors, Profit, Residential House

Author: lbuen

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Image by thinkpanama via Flickr

Property Flipping – The Good

These days, the term “property flipping” or “house flipping” carries illegal or fraudulent undertones. It used to just innocently mean buying a property or house below market value or at a discounted price from a motivated seller and selling it quickly with little to no renovations done on the property, thus, quickly generating profit. This real estate game plan includes wholesaling, contract assignment and fix and flip schemes. Property flipping is a good starting point for real estate investors as they can generate quick cash using this strategy with little to no money required.

Property Flipping – The Bad and the Ugly

Then unscrupulous and greedy individuals enter into the already topsy-turvy realm of the real estate market and sullied the innocence of the term through their twisted schemes. They buy a house below market value and overprice them when they sell to make huge profits. Some even go to the extent of quickly “selling” the property to an accomplice at a bloated price, then to another accomplice (sometimes the same person but using a different name), and so on, in a short span of time to further inflate its value. Thus, allowing them to rake in heftier profits. In many cases, these scheming individuals couple property flipping with mortgage fraud. Their usual victims are naive first time homebuyers in low income urban housing markets.

Sprucing Up the Defaced Real Estate Market Due To Property Flipping

The government has taken measures to put a stop to this subterfuge and prosecute perpetrators through the Financial Fraud Enforcement Task Force. To counter this epidemic in Baltimore, a joint task force with HUD was created and a 90-day foreclosure moratorium as imposed. Although numerous offenders have already been put on trial, some are concerned that the risk of facing prosecution may be dwarfed by the whopping pay dirt that property flipping fetches.

Brand Yourself As Real Estate Investor, Not As Property Flipper

If you have just joined the pool of real estate investors, eager to make some fast buck by flipping or wholesaling, do not forget to moderate your greed. Thriving in a world where capitalism is king, there is nothing wrong with being involved in gainful undertakings, such as real estate investing. In real estate investing and in most, if not all, industries, creativity is rewarded. Sometimes, our desire to get what we aim for trick us into thinking that some of our strategies can be called creativity, when in fact, it is already crossing the line. Just get a grip of yourself, steer clear of market manipulation and tread the legal path of buying from motivated sellers, renovating and truly adding value to the property, and respecting the existing market trends in dictating your asking price and profits. Sure, you can buy houses for less than its market value. This is why you look for motivated sellers. Just remember to pass on the good fortune of finding a bargain to your buyers by offering it below market value (if you really got a steal) and still make profit. In this way, you are not just summoning good karma, you can also quickly find a buyer, sell it and move on to your next deal. This is applying the real estate investing mantra of “Make profit when you buy, not when you sell.

When you get into property flipping, stay good and steer clear of the bad and the ugly.

 Property Flipping: The Good, the Bad and the Ugly
pixel Property Flipping: The Good, the Bad and the Ugly

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