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Flipping Houses

Keeping an Eye on Housing Bubbles

Keeping an Eye on Housing Bubbles

A housing bubble forms when prices and values in a housing market increase without substantial correlation to concrete property values, sources of income, and other economic factors. Usually they can be found to occur rapidly, or at least consistently, and can happen on various market levels. 
 
The nature and existence of bubble markets are often debated amongst economists, as to whether or not they can be foreseen or prevented, and even whether they should be.  As a matter of course, housing bubbles are commonly used by critics as proof that the market cannot regulate itself. In contrast, such a situation is also used by some economists, through a correctional pricing theory, that the market regulates itself.
 
House flipping is often blamed as a contributor to housing bubbles (especially the recent burst in 2005-2006), because the reselling of real estate inevitably involves an artificial increasing of property values. This necessary variable represents an unsustainable means by which to maintain income with high value, high risk, short term investments. Thus house flipping helps inflate the bubble; any properties that cannot be stabilized then become and anchor on the housing market as dead, overvalued homes…
 

Gentrification:
 
Gentrification is a term used somewhat controversially at times,  The roots of the word are fairly cynical, as it refers to earlier societies, where serfs and farmers would serve on the land, either paying rent or supplying cultivation, in exchange for the right to occupy it. 
House flipping has been seen in some areas as a cause for gentrification, for those looking to flip  Many argue, that this process leads to the marginalization of lower income groups, which when correlated to such issues as ethnic or racial classifications, augments the controversies involving economic and societal disenfranchisement, exclusion, and exploitation. In contrast, some argue that it has been beneficial to the salvation to some areas, and played an important part in the renewal process of some communitie.

Foreclosures:
 
Foreclosures can play a key part in any discussion of house flipping, both as a desirable means by which to obtain property, and the unwanted end point for any property flipping endeavor.
 
However, when examining the effects of flipping, foreclosures can represent not only the end result of a failed attempt at flipping, but also another means by which flipping can effect the stability of the market by artificially adjusting projections.  Thus, the longer a property remains unsold, the closer it can come to eventual foreclosure. 
 

Mortgage Equity:
 
Mortgage equity generally is calculated from home equity, and forms the basis of the kind of mortgage or loan one can acquire in order to gain capital from their property.  Mortgage equity represents any amount that can be withdrawn against the real value of a property, and is usually used as means to acquire liquid capital against the solid capital represented by home equity.
 
In house flipping, mortgage equity can be used as a means by which flippers acquire more income to repair a flipping property, or even engage in flipping in the first place. 
 
Mortgage equity loan flipping is also a common scam used by immoral mortgage lenders, who attempt to get homeowners to refinance a home equity loan multiple times, convincing them that they can acquire liquid capital, but each time bilking them for new fees and closing costs.
 
Flipping properties for profit, due to the expected increase of home values, can be seen as inflating the home equity values beyond what they actually are, which has been an ongoing criticism of the process.
 
 

Subprime Mortgage Collapse:
 
One of the key factors of the recent economic downturn and the collapse of the stock market in 2008 was the catastrophic losses, and in some cases complete destruction, incurred by lending institutions and finance companies who either engaged in the proliferation or trading of sub prime mortgages.  To make matters worse, some of these institutions “swapped” these loans to other organizations in exchange for stocks, similar properties, or market capital, thus spreading the catastrophic debt around and engaging in what may very well have been fraud.
 
A sub prime mortgage is a loan in the form of a mortgage, given below the prime interest rate in order to entice a potential homeowner into borrowing from a given institution. Such an instrument offered a lower yield mortgage to a borrower, to offer a more risky, yet profitable method to lend money. Sub prime loans offered high-interest rates to the riskiest of borrowers to offset the stability of stable investors, and to offer a more profitable means to inquire assets. 
However, in the build-up to the Sub prime Mortgage collapse, these loans were given out during what was a competitive lending climate, and as a result a great multitude were given to individuals with poor or questionable credit histories and limited capacity to repay.  Although unexpected by the borrower, the burst of the housing bubble in 2005-2006 made such loans highly elastic towards the economic downturn.
 
Not long after there was a steady increase in home foreclosure due to borrowers not being able to make their repayments, but it was not until 2008, that the market began to collapse under the weight of bad loans and foreclosed properties.
 
The house flipping industry perpetuated the bursting of the real estate bubble, due in large part to the increase in the acquisition of sub prime mortgages by flippers and also potential buyers. As a result of the deregulation, seemingly anyone could participate in the act of flipping a house. Such an instance not only increased the amount of riskier borrowers in the system but also inflated, due to a constant demand, the values of property. 

Watch Out for the Illegal Side of House Flipping

Watch Out for the Illegal Side of House Flipping

Much of the backlash against house flipping has emerged largely because of the role it has played in the recent economic meltdown, as well as the overall collapse of the housing market in the mid-2000s. Tied into this, is also the relative ease that the process of flipping houses can be abused to illegal ends, in ways that could be limited to a defrauded property buyer, and expanded to include the entire housing market system, and the broader economy as a whole.
 
At a very fundamental level, unethical house flipping can happen in seemingly uncomplicated ways. Often an individual looking to flip a property will look to do so while gaining the most profit for the minimum expenditure. Regardless of legality issues, this strategy often leads to a high temptation on the part of the flipper to take shortcuts in an effort to save money. The illegalities, in their simplest form, can be exemplified through fraud. The most basic of fraudulent acts occurs when properties are transferred in a misleading way, thus allowing a buyer to be swindled into paying more for a property than its actual worth. 
Such acts are dangerous in that they could perpetuate the instability of the physical structure (such as a poor roof or staircase, leading to injury), which obviously poses a severe medical risk to the prospective buyer. Such acts as cosmetic repairs being used to hide things like mold or asbestos are other examples of fraudulent acts taken when flipping houses. In some of these cases, the onus can be on the homeowner to make sure that a property is in suitable condition. That being said, the flipper is responsible for making sure that fraud does not enter into their selling of the property.
 
The far more devastating form of property flipping is found in the long-term economic impact of the broader macro economy. Flipping houses often involves the dramatic inflation of property values and the defrauding of lending institutions, which comprise a large part of the overall economic makeup of the system. Though illegal, fraudulent flips can take many forms and differing complexities, which generally follow a fairly set pattern. 
The initial investor purchases a property for far below market value, and then finds what is typically called a “straw buyer,” a second investor in league with the first, who will take out a loan to purchase the property at the same value.  The third buyer usually takes out a loan at reduced interest rates (thus making the con more seductive to him), which is where the loan officer comes in. The first two investors pay off the first loan with the proceeds of the third buyer’s mortgage loan, ultimately paying very little out of pocket and making a substantial profit (because the initial investor was repaid on his purchase by the straw buyer’s loan, which is then repaid by the third buyer). loan.
 
The presence of defaulted loans and the substandard properties attached, played a large part in the economic meltdown and the collapse of the housing market.

Making Money with Multiple Investor Flipping

Making Money with Multiple Investor Flipping

Generally, house flipping takes the form of purchasing a house at a very low price, repairing it, and then selling it at an increased price (sometimes known specifically as fix and flip).  This form of house flipping is called multiple investor housing flipping.
 
What multiple investor flipping generally entails is that a property is flipped at least twice by two different investors, with the initial investor generally paying below market price for the property. 
 
Generally, buying a property from someone below market value means that it is being purchased at a loss for the seller, so it only occurs under very specialized circumstances. What this means is that the initial investor is generally purchasing the property due to a disadvantaged circumstance. 
 
By purchasing the property for less than market value, it is generally guaranteed that the property can be turned around for a profit, which is what the initial investor in multiple investor flipping seeks to accomplish. This procedure implies that the sale it to a secondary investor, occurs generally at a gain (which, depending on the initial expenditure, does not have to meet market value.)  flip multiple times but generally once it reaches its market value, it becomes difficult to keep flipping the house.
 
Though multiple investor house flipping can be perfectly legal when done ethically, it is often frowned upon in real estate circles for two very good reasons. 
 
Secondly, multiple investor house flipping generally forms the basis of some of the more common forms of “fraudulent flipping.”  Then, sometimes with the help of a corrupt appraiser and loan officer, they will inflate the value of the property and sell it to a third buyer (in essence, the “mark”), usually and individual without means to support a mortgage, who will take out a loan for the inflated price to buy the property. The two investors pay off the first loan, ultimately paying very little out of pocket, and making a substantial profit.
 
To remedy this fraudulent practice, legislation was passed in 2006 which guaranteed a 90 day window of ownership, which must be observed before a property could then be eligible for a Federal Homeowners Association approved loan. This form legislation effectively minimized the potential for this form of fraud, and drastically diminished multiple investor house flipping.

A Helpful Guide to Flipping Houses

A Helpful Guide to Flipping Houses

Flipping was a colloquial term that eventually gained some parlance due to repeated use.property, purchasing it at a reduced price and then shortly (if not immediately) reselling it for a profit.While flipping can be used in conjunction with many forms of property, such as stocks or vehicles, its most common usage occurs in real estate.
 
Generally, in real estate terms, flipping refers to buying a property at the lowest price possible, and then, after making some cosmetic repairs or improvements to the property, turning it around and selling it for as high a profit as possible. 
 
Flipping houses is not an illegal practice, and when done correctly in the right housing market, the maneuver can be a shrewd means by which to turn over a real estate investment. The practice of flipping houses, although profitable in many instances, has garnered a rather unsavory reputation. Such a stigma has been attached to the practice as a result of the explosion of many housing bubbles, and the presence of potentially exploitable illegal scams, such as mortgage and consumer fraud. Furthermore, such a maneuver has also been linked to the perpetuation of enabling gentrification in many already lower or middle class income areas.
 
One of the side effects of flipping houses, even when done honestly, is the propensity for the over-inflation of property values and the proliferation on numerous low interest, low money down mortgages–such instances have been used for both the purchasing of the flipped house by the flipper, and also by the individual seeking to purchase the flipped house. Usually this occurrence has an adverse effect on numerous levels, for it causes the market to become over-saturated with bad loans made on flipped houses that barely leverage against the cost of the loan.  As an aftereffect of the burst, the market also becomes stuck with numerous unsold flipped houses, thus depressing the market even further.
 
The real estate bubble burst (occurred between 2002-2005), in essence, was perpetuated  Also hurting the reputation of flipping houses has been the sociological accusations of gentrification, in that neighborhoods with flipped houses tend to increase property values so that over time they drive out lower income families.
 
Perhaps most fundamentally though, flipping houses represents for many consumers a very risky purchasing situation, where extra safeguards need to be taken to insure that a home has been properly touched up for flipping purposes.

Know The Types of House Flipping

Know The Types of House Flipping

Multiple Investor Flipping:


Generally, house flipping takes the form of purchasing a house at a very low price, repairing it, and then selling it at an increased price (sometimes known specifically as fix and flip).  However, there is a division of house flipping where houses are flipped between multiple investors before it enters the fix and flip stage. This form of house flipping is called multiple investor housing flipping. 
Generally, buying a property from someone below market value means that it is being purchased at a loss for the seller, so it generally only happens under very specialized circumstances. What this means is that the initial investor is purchasing the property due to a disadvantaged circumstance. This could mean that the seller could be desperate to sell the property, because they need money or are in danger of foreclosure, or the property could be purchased at auction after a bank foreclosure or after the government has claimed the land due to delinquent tax payments.
Fix and Flip:
Fix and flip is the general industry reference to the most common form of flipping houses for profit, and specifically the practice of purchasing a house at a low amount, making necessary repairs and/or cosmetic improvements, and then selling the house for a profit, completing the “house flip.”  Fix and flip can, at times, be synonymous for house flipping, but there are other forms of house flipping as well, many that often do not entail repair work between the purchase and the “house flip.”

How to Flip Houses Easily

How to Flip Houses Easily

Despite the legal nature of the practice, the art of house flipping should be executed with prudence and proper judgment. When flipping a house, it is one’s legal responsibility as owner, buyer, and seller of a property to avoid the potential pitfalls that could lead to consumer fraud. Although the process only includes three fundamental steps ( buy a house, repair a house, and then resell it), the act of legally and ethically flipping a house often lies in the details of the process. That being said, great care and attention must be paid in order to properly administer such a maneuver.
 
The problem that comes with flipping a house lies in the numerous opportunities it presents in cutting corners and committing fraud. Primarily when buying a house you would like to flip, you have to make sure to purchase a property, that not only has potential to be fixed up for a reasonable cost, but also one that can be done safely and does not require major restoration or repair. Such renovation is required in the process to ensure that the eventual house you intend to sell does not pose a hazard to the new occupant, nor even represent a “lemon.”
 
Buying property to be flipped can be difficult enough, so make sure that all precautions are taken.land survey should be taken of the property to ensure that it has potential to be repaired or restored. Homes with irreparable damage or glaring weaknesses, that would be too costly to fix, should be avoided 
 
If the house is purchased, you want to make sure that you do not hold back on all repairs needed.If work needs to be done on any building, a permit is usually required. This cannot be overlooked, for its the law, and also protects you from any culpability down the line if any future owners find themselves slapped with a fine for uncatalogued changes to the property. In addition, it gives you tangible documentation in the form of paperwork to show that you have given due diligence, especially to any buyers who learn they are interested in a flipped house.
 
In some respects, knowing how to flip a house comes down to having the proper attitude.  Understand that often very savvy buyers, especially those represented by experienced real estate professionals, are going to check out everything about a property before they purchase it. This natural skepticism will invariably lead to the inclusion of inspections or appraisals before the sale; such maneuvers guarantee that a proper transaction has been made.
 
Of course, the most important thing to understand when it comes to flipping a house is the existence of great risk. The process, which obviously demands an expenditure, will only be salvaged or deemed profitable when the property in question is aligned with an appropriate buyer. This matching, although profitable and harmonic, could take years to accomplish given the stability or health of the housing market in question. Flipping a house can be a lucrative investment strategy,ethically and properly, there is still a high risk associated for such a maneuver.
 

The Best Tips for House Flipping

The Best Tips for House Flipping

Flipping properties is a risky, yet potentially lucrative endeavor, that should be done ethically in order to avoid charges of fraud.
 
First house flipping tip:Flipping properties, like any other form of sales, requires a deep understanding of the consumer and the market in question. Flipping a property involves a tremendous expenditure of capital, and even the procurement of burdensome loans. 
 
Second house flipping tip: make sure that you understand and budget the repairs you will have to make for when you are flipping your property. If the property is outside of what you are willing or able to spend it won’t be worth your time or money.
 
Third house flipping tip: understand that your property will incur costs just from existing.taxes, insurance, and even utilities on the property so long as you still own it. Furthermore, if you purchased the property using a mortgage or loan, be prepared to have to begin paying it off, even if you hope to repay it in full after flipping the property.
 
Fourth house flipping tip: always make sure you are consulting professionals all the way through the process.  These people are professionals, and sometimes they can offer valuable advice on how to make a home more “sellable.”  On that note, make sure you are only using quality contractors and craftspeople when you do your repairs, and that they are using the best materials.
 
Fifth house flipping tip: if you are making repairs to a property that requires a municipal work permit, get the permit.  Anything that shows you are on the up and up will go a long way towards sealing the deal.
 
Sixth and final house flipping tip: be diligent over the repair, purchase and selling of your property.  Even if you bring it the best professionals you can find, you are still the one who will be putting it on the market, and it will be you and your reputation on the line if something goes wrong with your property.