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Real Estate Investing: Tips To Keep You Legal And Out Of Prison

Jan 17, 2008
Flipping houses, for new investors is a great way to get starting in real estate. In today's market, foreclosures are a great place to start when looking for potential investment properties. Foreclosures are at record highs across the United States, therefore opening the door to another increase in the number of investors trying to make their hopes and dreams of fame and fortune a reality. However, there are key fundamentals that you need to understand before starting.

By definition, real estate flipping is the process of buying a property and selling it for a profit. When "flipping houses" enters most peoples minds they think that buying and selling only houses is the only way to make money, and do not understand that there are other ways types of real estate that you can "flip". For example, commercial buildings, land and all other types of real estate can be "flipped" as well.

Flipping property to make a profit, can sometime be a bit confusing, there are people that specialize in locating the "bargain real estate", get a signed purchase agreement and then sell just the contract before they take ownership; these people called "Bird Dogs", often can get started with very little to no money up-front by:

- Finding bargain property where the seller is in distress
- Finalizing the sales contract
- Reselling the contact to an experienced investor for a quick profit of $1,000-$10,000

Some people believe that flipping real estate is illegal, well just to clear the air, is it NOT. In the past several years there has been a great deal of mortgage fraud allowing people to make money very quickly, but the practice of flipping real estate is not within itself, is not illegal. Moral issues are another topic.

Investors that have worked out "deals" with brokers, appraisers and mortgage companies that qualify buyers that should not be, by inflating property values, financial information or other unethical practices are doing things that are illegal. One of the reasons that foreclosures are at an all-time high today is because, of illegal activities such as these. Getting buyers into homes with mortgages that they cannot afford to pay, while on paper it all looks good, reality sets in when the homeowner defaults on the mortgage and ultimately causes the lender to loss money.

Avoid legal issue, do not commit fraud or get involved in illegal activities. It may just keep you out of prison. "Sinking with the ship" does not do you much good when you are trying to build long-term wealth and happiness.

Here are some tips that will help you to make money flipping real estate:

1. Have your financing in place to close deals quickly, remember, time is money

2. Understand the current market, knowing the current market will help in evaluating the potential profit in a property.

3. Look at foreclosures or homes that are in default to find some of the best deals

4. Avoid costly penalties by closing the loan on time do not delay, if possible

5. Avoid illegal activities, such as inflated appraisal, falsify W-2 and other financial information, giving buyer a "gift" for there down payment all these activities are illegal, stay out of prison and stay away from them.

There is opportunity to make money, legally, in flipping real estate. Do not take part of mortgage fraud and enjoy the money that you make.
About the Author
Thomas Bladecki is the author and can provide additional information about foreclosures and the current real estate markets visit Home Foreclosure Help.
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