i am starting out and need to begin. i have found a property that i would like to use for a busisness. it is a house. it needs some repair and coverting to open for the type of business that i will open.
i also don’t have money or good credit. it was suggested that:
- get hardmoney loan to rehab it
- flip the property for the cash-out
- then in one year, refinance the property
lastly is it legal for an investor to buy a property and then sell it to me after they have fixed it? is this all flipping is?
Is Flipping Illegal?
Flipping, also known as the buying and selling of a home, is not illegal in any shape way or form. There is absolutely nothing wrong with buying a home cheap and selling it for more then what you bought it for. There is also nothing wrong with buying a home, fixing it up, and selling it for way over market value. If your buyer wants to pay you way over market value, and they have the means to pay you, then it is their choice. They can do that and so can you without any recourse.
The problem arises when a lender is involved. What people typically refer to as “illegal flipping” should be called mortgage fraud. The media has given real estate investors in general a bad name, because they aren’t focusing on the real problem. Without mortgage fraud, homes could not be sold for more then what they are worth when a lender is involved. Lenders want to lend based off of what a house is worth today. They lend at varying different Loan to Value ratios depending upon the borrowers credit worthiness. The problem with “illegal flipping” is when investors, mortgage brokers, loan officers, appraisers, etc… get together to “create” a better picture of a loan package to a lender. They do things such as inflating appraisals, gifting down payment, drawing up false w-2’s, manufacturing pay stubs, writing credit letters, etc…
If you buy houses low, and sell houses high, but avoid mortgage fraud, then you are not doing anything illegal. You don’t have anything to worry about.
Rob I’m new so take it for what its worth… try talking to to the owner now and see if they can carry the note for you and since your starting a bussines there, see if you can cut them in on a pice of your profits, mak it interseting to them and profitible to them and maybe they’ll help you with cash you need… be creative in what your asking for… good luck…
What is wrong with a letter of credit. I have been talking to a real estate agent and looking at a preconstruction. She says 5% down and a letter of credit for 20%. I can resale as the market goes up before it is finished with construction. Is any of this illegal?
???I would like to know if a contractor can do flippin easy? I am a contractor, my son is general contractor, and my other son is a builder. Well, I think if I do flippin for several houses, I would to have enought money to do rehabbin for a while. I need to know the fastest way to go about this adventure and proper paperwork needed.
I am retired and this may be last project. I love contruuction and need to stay in it. Help!!!
Mark & Manlawn,
This is not illegal.
I have looked for preconstruction or New Construction deals in New York for over 3 years (1999 to 2002) before I discovered the great state of Florida and its Lenders. In 2003 I became an investor here in Florida also, where I have done New Construction Deals.
In fact my partners and I have just received an offer today (Full Asking Price 8)) on a New Construction Duplex we are building. The Duplex will be completed in August 2005. We are most likely going to accept this offer & hope the buyer gets the financing. I have done other deals like this already with the contract for sale prior to completion. Then when the CO (Certificate of Occupancy) is issued we close the same or next day. My Duplex deal was done with less than 2% down, while the other New Construction Deals were for about 5%-10% down.
I say try it and see.