Real Estate Investing – The Ethics of Flipping
Many people out side of the real estate investing share the opinion that flipping houses is semi unethical because you are often making a large profit off of someone else’s misfortune. This could not be further from the truth. Flipping is not the least bit illegal or unethical though there are some situations that you must keep your eyes out for:
The first thing that you must remember is that there is nothing illegal about buying something low and selling it high. This is as American as apple pie and what our economy is built on.
The only time that flipping is illegal is when fraud is involved. The best way to avoid any type of fraud is to stay away from any deals that feel shady, deal with people you trust and keep everything transparent. There is absolutely nothing wrong with making a profit, even a big one. People sell below market value all of the time and often times when they do taking the property off of their hands is doing them a favor.
The true value of a piece of property is set by the price that it sells for. Sure you may think you can sell it for more and that is great but whatever you paid for the property is the true value. Determining a reasonable value for something when you are trying to sell it is basically a function of what other things in the area are selling for. You add up the pros and cons and assign value to each one and work your way down the list. Of course I am simplify but the point is that it is impossible to know what the actual value is until property sells.
It is disappointing that real estate investors are often demonized by the media as driving up prices and causing speculation problems. This could not be further from the truth. Any investor realizes that they are in the business of finding deal and making them work. Sometimes this take hard work and creativity but this hard work allows investors to find deals far below market value. It is the retail buyers that speculate and drive up the price of homes. Investors have already made their money.
Real estate investors also know that the handful of unethical real estate prospectors has the ability to give the market as a whole a bad reputation. This usually only happens when a number of people get together and attempt to manipulate a market. It takes a tremendous amount of work to pull a stunt like this off and it is usually fairly easy to follow the paper trail and find out the truth.
Flipping homes is actually a very essential part of the real estate market that helps revitalize areas and add value to impoverished areas. Professional flippers usually complete remodels much more quickly and efficiently than home owners would be able to achieve a similar type of work. So, if flipping is your real estate investment niche recognize the important service you are providing.
