First off, I’m in Wisconsin. I’ve asked a few questions before and didn’t really get anywhere, so I’ll just ask a blunt question.
As of 2006, is wholesaling viewed upon as legal? And I’m not talking about the “flipping” where you get a buyer, appraiser and a lender together, colluding in jacking up the value of a property. Unless I live in a state that doesn’t have a clue about, I cannot seem to get one answer on this. It sounds perfect, finding a property from a motivated seller, doing a quick inspection, figuring the ARV, negotiating a sales price and then selling it to a potential buyer. Is that it in a nutshell?
I feel like if I have to explain this idea to others, they think it’s illegal or something like that.
As long as there’s not price fixing and no collusion, it is legal.
My two cents…but, I’m not a lawyer and I don’t live in Wisconsin.
Keith
what does price fixing and collusion mean? clueless please explain…
Where in Wisconsin? I am in West Allis, western suburb of Milwaukee.
What you refer to, “flipping”, is perfectly legal, although probably not the ideal way to build wealth. The IRS deters speculative buying and selling (coined “flipping” by the real estate community) by legislating much higher taxes responsible by Real Estate Dealers, which is how the IRS classifies flippers. There are other rules to adhere to tax-wise as well, in particular what you can (and mostly cant) deduct, nor can you use a Section 1031 (Starker) exchange to defer your taxes.
That aside, it is indeed legal. The best way to conduct flips is let all parties involved that you are indeed flipping the property. This is easier said than done because no one wants to find out that they are paying a marked up price to someone who did nothing more than find the property before they did. Basically you are the middleman, which means that there is always a chance that the end buyer and seller will find a way to cut you out of the deal if they can.
All in all, flipping isn’t recommended. With that being said, every real estate investor/rehabber will occassionally run across a property which is ideal to flip and it can provide important capital to “grease the wheels” of your real estate business.