ArticlesHonest and Ethical Real Estate Flipping
Most articles I see about Real Estate Flipping make me sick to my stomach. Hey, I like making money as much as the next guy, and I realize that in order to put money in my pocket, it has to come out of someone else's pocket. But I have a problem with pursuing and making deals that take advantage of someone else. Even if it is a "just a little".
Here's a couple of example of techniques I see in flipping articles that make me cringe, and why:
- Finding sellers who are under stress with a property, securing a sales contract and selling the contract to a seasoned real estate investor for a quick $1000 to $5000 profit.
- "Helping" a seller going into foreclosure save their credit by arranging the sale of the property without taking the title (buying the property and double escrowing to someone who wants to live there)
I see these "techniques" in flipping articles all the time. First off, it's not as easy as it sounds. But that's not what I take issue with.
The reason the owners are under stress with the property or are going into foreclosure is because there is something big going on in their lives. Okay, I guess "Big" could be something great for them. Like maybe they got a terrific job as a movie star and need to move out of town quick so they need to sell fast to take the new job...or some other dreamy story like that. Sure, you can convince yourself of that if you want to, but let's face it. It's more than likely "Big" as in "Big and Bad".
The "Big" is more likely that the owners are going through a divorce. The "Big" might be that they lost their jobs and are slowly ruining their credit. "Big" could be that they got cancer and have spent all their money on medical related bills and now cannot afford the home, etc. etc. etc.
So let me ask you a question. If you were down on your luck because of something as serious as cancer, would you really want someone trying to convince you how they were "helping you out" by making a profit off of *your* misfortune? Of course not.
You can still make money flipping homes without taking advantage of people. The way that my partners and I make money flipping is to find homes that simply haven't been well cared for or haven't been properly updated. Then buy, fix/update and resell. Nobody gets taken advantage of or misled. These sellers know that their property is worth less because it requires a bunch of work. And if they don't know, it's easy to show them a list of things that need to be done to the property in order for a new family to move in. I think this is a much more ethical way to do flipping and it helps me to sleep well at night.
I'm not preaching because I'm a religious man and God told me that flipping should be done this way or anything absurd like that. I just believe in doing what I was taught when I was a toddler which is to "Treat others as you would like to be treated". And to make some money while doing it.
(c) Copyright 2006, T.J. Etherton. All rights reserved.
T.J. Etherton, one of the founders of The Cashflow Crunchers, a web site for Real Estate Investors to share investing tips and other information. For more articles, tips, and free online calculators to help determine if a property is a good investment or not, please visit http://www.cashflowcrunchers.com
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