opportunity to flip

I have been offered a sounds to good to be true deal. I know next to nothing about real estate so I am a bit lost on some of the terms.
I have been approaced by some friends of a friend about buying a house for $850K. They would then “buy”
the house from me for $950K. I would then give them 90K and I would keep 10K. They say the reason for doing this is that in Texas, a cash out is not allowed until the house is owned for at least a year.
The 90K will be used to fix up the house which they will then sell. I have read online about “straw” something or others. The only difference I see here about this is the people that are asking me to do this have excellent credit. Any kind of information about the legality of this would be greatly appreciated. I will definitely consult a lawyer about this but just wanted to have at least a base of knowledge on the subject. Thanks to all!

Sounds fishy to me…But a lawyer would be your best source for advice on this type of matter.

I’d be very interested in hearing what your attorney has to say, and also people on this forum like Tedjr, WilsonTaylor and DaveT.

My thought is, if they have such great credit why do they want to use yours? When they default, which I am sure they will, what are you going to do with your 850k house? They walk away with 90k, your 10k isn’t going to make very many mortgage payments, much less repairs it supposedly needs. If this person can pay YOU 950k for a house why can’t he pay 850k and use the remainder for the repairs? Why do you have to be involved? You say that you will “sell” it back to them. What does “sell” mean? What kind of a transaction is it that they can get cash back when you sell to them? Unless I am really missing something, it does not make any sense! Don’t just walk away, run away and find better friends!

I may be a little harsh here, but I spoken with too many newbie investors who really get themselves in a jam–usually when a so-called friend is “helping” them get started. Usually just little things that can be overcome without too much pain. Your post made me think of a recent conversation with a teacher that was scammed by a friend of a parent of one of her students, of all things. She ended up buying 5 houses she had never seen at full value. I take that back, at grossly inflated values. One she thought was in a nice suburb because the street name had “Lake” in it. Only about 20 miles off, in a neighborhood I don’t go to even in the daytime! All were supposed to be cash-flowing with tenants, but she never saw a lease, had no idea who the tenants were, if they even existed in the first place. The nice people who put the deal together told her they would take care of all that, and just pay her monthly from the rents. When she drove by after buying, she realized that they were major fixer-uppers. She never received a rent payment and called me wanting to sell when the bank started to foreclose. I was stunned that anyone could be this naive,This seemed like such an idiotic thing to do. I did ask her if she got cash back at closing. I think she cried a little, and said she had saved some money and just wanted to use real estate to supplement her retirement. I did wonder if she was in on it. She didn’t seem angry enough for a person who was scammed. Maybe that was the next stage. I did tell her to contact an attorney and gave her the phone number of a local reporter who has exposed real estate fraud in the past.

There are too many legitimate ways of making a lot of money in real estate. If on the very small chance this deal is legit, do your own due diligence, look at the property, get your own inspection, appraisal, use your own attorney/title company. I bet that if you tell these people up front that this is what you plan to do, you’ll never hear from them again.

Sorry for such a long post! I just hate to see people get taken advantage of!


Cash out is not illegal in Texas unless the laws have been changed in the last 2 years and I have not been told about it. This is a verrrrrry large property to be considering as a new investor. I would not consider this property myself and I do not consider myself a newbie. This is the type of position that will get you into trouble in the blink of an eye. My suggestion would be to ask a realtor in the area what similar properties are selling for and how long they are staying on the market. If someone was selling you a pig in a poke and you had to pay for the mortgage yourself, how long could you hold out before you were bankrupt?

Don’t get suckered into a get rich scheme. It can blow up in your face.


Thanks for the advice. I will steer clear of this.

Funny how I used the same term when texchick asked me about this one…