Jason Loucks asked:


Is home-flipping legal or not? At seminars, I'm often confronted by people who insist "Flipping" is illegal.

What they don't understand is that the part that's "illegal" isn't the transaction, it's the mortgage fraud that some unscrupulous people commit in order to get the deal funded.

When you use an "Option to Purchase" to control a house and sell it, the end buyer is responsible for their own financing. That means no "fudging" on your part, and no possibility of fraud.

The Buyer agrees to pay a certain amount, and has a down payment and credit to match, and knows the deal. They haven't been misled, and you haven't helped anyone commit fraud.

The problem comes in when the seller and the Buyer are working together to get an unqualified Buyer a loan they really shouldn't get. As an example, here's what some people consider "flipping":

They'll buy a house, or even just contract it, and then turn around and sell it to an unsuspecting homebuyer or Investor, often from out of town or with no Real estate experience, and usually with no money down or for very little down.

Next, they'll bribe an appraiser to give a fictitious appraisal, much higher than the true Comparable sales. They'll work with a mortgage broker who will show the borrower how to submit false documents to the mortgage lender to qualify for a loan they often can't afford.

Then last but not least, they'll forge the closing statements from the Title Company to show a down payment and/or closing costs coming from the borrower, in order to get the bank to fund the deal.

Is this what you consider "Flipping"? Bribing appraisers and falsifying loan documents and paperwork? If so, then you're right, it is illegal.

But when you "Flip" a house by selling it for retail price to a retail buyer, who works with a legitimate appraiser and Mortgage Broker and gets their own financing, with no "funny stuff," there's nothing even slightly illegal or grey about it. It's simple and easy, with no B.S.

Some people are just simply SOOO lazy that can't be bothered to buy houses at a discount- instead, they falsely jack up the price, bribe an appraiser to confirm it, and try to pass them off onto an investor or homebuyer who commits mortgage fraud to get them funded. THAT is illegal.

Don't get me wrong, I don't have a whole lot of pity for the Buyers in those fraudulent transactions. They are the ones buying houses without enough common sense to even check the value first!

Here's something else you should learn from this: These supposed "victims" (who all volunteer to commit mortgage fraud and know what they are doing, by the way) buy these properties at grossly inflated values based on appraisals someone else ordered for them. (I know, it's hard to imagine they were taken advantage of, huh?)

NEVER believe what someone tells you about a property without verifying it for yourself. That means you have to do your Due Diligence- check every assumption- about the property BEFORE you buy it, not after.

While house flipping has gotten a bad reputation in the last few years due to a few bad apples, it is still a great way to get into Real Estate Investing if you know what to watch out for. Done properly, house flipping is legal, moral and ethical, and is a great way to invest in real estate without tenants, rehabs, or risk.



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Foreclosure investing is actually quite not quite as difficult when people have finally taken that leap of faith and go for it. This really applies to anything else in life. Remember all those late nights where you'd stay up and watch those "how to make millions in your sleep" tV spots. Or perhaps you remember all those times you went to the book store and purchased tons of real estate investment study guides.

In fact you probably have a huge library and collection of real estate, investment, and how to get rich quick type books by now. Some people may get a feeling of being overwhelmed after wading through those thick books and studying all the complex terminology.

The bottomline is, if you are a naturally goal-oriented and self-disciplined person than you can probably achieve a full-time income in real estate within a year with the right system. So how do you choose the "right" system when everyone and his uncle says they are an expert or guru within the real estate arena?

One thing you might want to consider doing is to align yourself with a friend or relative who is already successful in real estate investment or at least in the type of real estate that you are interested in doing. Don't be shy, definitely get in touch with them.

It may be a friend from high school or college, or perhaps even a former room mate that you knew when you were just getting started with your own life and needed someone to share the rent costs with in order to have your own place, etc. I am sure that if you ruminate for a bit, you may even surprise yourself at how much opportunity there is in your own circle.

That is actually a very good idea- the best way to get into real estate successfully is to have a teacher or at minimum someone that can really show you the ropes and provide feedback in real-time. No matter how well written the courses you're looking at is, nothing really compares to a trusted friend or adviser that can actually walk you through this process step-by-step.

Even if it isn't step by step, it's still great to be able to call someone up and ask for constructive criticism on what you are doing as well as to add some fire in your belly to the process. Folks this relationship is priceless. You can save hundreds of hours of time learning things on your own, and also save thousands upon thousands of dollars in costly mistakes.

Ultimately you will have to walk the path yourself in order to learn and gain from this wonderful industry. But the initial first steps will furnish you with the momentum to be able to zoom on your own two wings.

Everyone has heard about house flipping. There is even a reality show called flip that house. A lot of news headlines and real estate people talk about illegal house flipping. But if this process is illegal, then how is everyone doing it and talking about how to do it?

The fact of the matter is that house flipping is not illegal if it is done properly and ethically. Anyone who has ever bought real estate for a primary home and then sold it for a profit later has successfully flipped a house. That is the basic idea behind house flipping. The real estate investment is purchased, and then resold later for a higher price. The length of ownership time may be months or decades, and that does not matter for this purpose. Sometimes this may involve renovating or repairing the real estate before selling it, to increase the value of the investment.

What everyone has been calling illegal house flipping is actually real estate fraud. These cases generally involve people who have lied or misled about significant facts to wrongly inflate the value of the real estate investment. This includes payments or bribes to get the property appraised at a value higher than what the real estate is actually worth, falsifying down payments or any other information like tax receipts and check stubs to get a loan that is not qualified for, and more. One type of real estate fraud is lying or covering up obvious or serious problems with the house to lenders, as well as to buyers who are not sophisticated. Another fraud type is to back date any documents that are needed for the loan, such as lease agreements, to give the impression of a longer length of time.

Unfortunately, the news media has confused house flipping with the types of fraud mentioned above. Many escrow and title companies refuse to do double closings, and many lenders have something that is called seasoning requirements on the ownership by the seller. This generally means that if you have not owned the real estate investment for at least half a year most lenders will assume there is something funny. This means that these lenders will not loan to a buyer who is trying to buy your house under these circumstances.

Flipping houses is not illegal as long as there are no misleading or fraudulent statements made or signed. If you are investing in real estate, make sure that you read all the paperwork and contracts very closely. The contract is the statement of facts that you are providing to the lender. This contract should not contain any deceptions or false statements. This process only becomes illegal when fraud is committed, usually in the form of deceptive or misleading statements made in the lending contract. As long as you act honestly and ethically, there is nothing illegal about making money by doing honest business.

Copyright © 2007 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author's information with live links only.)

Flipping houses, where you buy, remodel and then sell property all within a very few months is growing in popularity across the country. And to be sure, there are great profits to be made in this kind of real estate investment. But you also need to know what you're doing as well, and here are the top five tips on how to flip houses the smart way.

1. First of all, be sure that you understand that flipping homes requires lots of hard work and effort in order to be successful. It's also not risk free, and this is especially so since it is a more short term real estate investment strategy. Small fluctuations in the real estate market can easily go against you and wipe out most if not all of your profits very quickly and easily. This is not said to discourage you, but simply to help you be prepared for the realities of the real estate marketplace.

2. Understand as well that when you adopt a short term strategy for making real estate profits that only involve a few months worth of ownership at a time, you will be taxed on the profits as if it were regular income. Many first time flippers don't realize this and are surprised when they lose a good portion of their profits in the form of income tax. So be sure that you plan ahead and factor in this expense before you get started.

3. When flipping homes for quick profits, don't try to over-renovate the house. Try to find houses instead that need some cosmetic work that can be done relatively inexpensively and easily and then stick to your game plan as you go. Don't try to build some kind of dream house instead, as you will simply lose time and money by going that route.

4. One of the great keys to successful real estate investment is to check your emotions at the door. Buying and selling real estate investment properties should not involve emotion at all in order to be successful. Let the numbers speak for themselves, and if the profit margin on a particular property is not within your tolerances, move on and find something else.

5. Learning how to build a dream team of support personnel including subcontractors and real estate agents, will be a large factor in your overall success. Of course, the more work you do yourself, the more profit you will usually make. However, on many occasions enlisting outside help from contractors, plumbers, electricians, and so forth can help keep you on track and get the job done in the allotted time. So do your best to find good, reliable people in the construction and real estate industry as you go, as a support team.

If you do your research on home market values diligently enough in advance to identify houses that can be bought well below market value and then renovated inexpensively, you can usually make a significant profit on most of your investment properties. Some of the most important keys to your success will be buying the house at the right price, having a clear plan and timeline for the remodeling work, and then pricing the house correctly in order to get a quick sale.

Armando Montelongo is the United States most successful person who Flips houses. He has flipped many houses in a month and is the host of the A&E TV show 'Flip This House'. 'Flip This House' is a Real Estate reality series based on buying and selling properties. The main concept is to find a good prospect of a property, fix any needed repairs or upgrades and then after restaging the house to make it look good for selling, the property is sold to make a good profit. Armando Montelongo could be known as Mr. Flipster.

Armando Montelongo started out with not much at all and eventually through hard word and dedication, achieved success in real estate flipping houses. Montelongo reached his success not only through hard work and dedication but also positive thinking. After he reached a level of success, Armando decided to share his knowledge. Armando Montelongo then set out to create a system to teach others how he bought, funded, fixed and repaired and eventually sold properties for profit. This system is called "Flip and Grow Rich".

Armando Montelongo was born and raised in San Antonio Texas. In Texas, Montelongo built the largest real estate firm of its type in just several years. Armando started Montelongo House Buyers. That is a company that flips many houses a month by design. Armando also does the show with his wife Veronica Montelongo. Others include David Montelongo. The show is a real hit for real estate programming.

Armando Montelongo has helped thousands of people make their dreams come true by teaching real estate and flipping houses to people through his 'Flip and Grow Rich'. He has an intense passion for real estate market trends and developing techniques. He offers Real Estate Coaching for anybody that wants it. He has come up with some of the most profitable and smart real estate investing tips available.

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