This is a common question from novice investors just looking into investing in residential Real Estate for the first time. The answer is NO—Flipping, also known as wholesaling, is a very legitimate, lucrative and LEGAL business practice.
Simply put, flipping houses involves a Real Estate investor who purchases a property in need of some repairs, who then makes the repairs to improve the property and increase its value. Then, due to the property’s increased worth, the investor is able to sell the property for more than he or she purchased it.
The other, even quicker form of wholesaling involves some different processes the investor can use to complete his or her Real Estate deal. The investor could wholesale a property by selling it directly to another investor by assigning the contract. Or, the investor could simultaneously purchase and sell a property to another investor who sells to a final buyer.
It is important to note that there are dishonest Real Estate investors, agents, appraisers, lawyers and/or mortgage officers out there who do illegal things to make money illegally in Real Estate. Watch out for appraisers who inflate home values; investors or loan officers trying to pass funds “under the table” in order to get unqualified buyers into the transaction; or lawyers who are willing to falsify documents necessary to complete a transaction. All of this is illegal.
Take the necessary steps to ensure you have as much knowledge as possible before stepping into your first Real Estate investment.
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