Is property flipping actually illegal?

On Behalf of | Jan 11, 2022 | Developing Real Estate |

If you’re looking into flipping properties for profit, you may be surprised if you put that term into a search engine and find out that it can be illegal. You’ve watched shows on this, you’ve read books about it, you’ve talked to other professionals who do it and you know that you can make a living flipping properties. How could it be illegal?

The truth is that property flipping is very common and it is generally entirely legal. It is a good way to make a living for a lot of people, and there’s an art to knowing exactly how to do it.  

What do you need to avoid?

In rare cases, this can be illegal, according to the Federal Bureau of Investigation. However, they note that the illegality stems from artificial price inflation and minimal upgrades. Essentially, they view this as a way to scam other people out of the money that they’re paying for that property.

For instance, you could buy a home that seems like a good deal and then find that it has all sorts of water damage inside. Rather than actually fixing the water damage, you could just paint the walls to hide it, double the price, and then sell the property. This is an illegal version of fraud because you’re intentionally concealing those issues and trying to inflate the price anyway.

But, if you tore out all of the damage, replaced the walls, and fixed the leaks coming down from the roof, then you could realistically increase the value of that home by quite a bit. This is a legal process and you don’t have to worry.

If you’re interested in getting into property investing or if you have other questions about the legal process, it’s very important to know exactly what to do and what not to do in advance.