Fix and Flip Pitfalls to Avoid to Stay on the Right Side of Real Estate Law

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fix and flip pitfalls to avoid


Investing in real estate is one of the quickest ways to experience a return, especially if you choose to enter the market at the right time. If you’re thinking of investing in homes or commercial lots to flip and resell them, there are a few fix and flip pitfalls to avoid ensuring you stay on the right side of the real estate laws in place at all times. The more familiar you are with common fix and flip pitfalls to avoid, the less likely you are to find yourself in trouble with the law or with any of your current investments.

What Is House Flipping?

Before you begin researching common fix and flip pitfalls to avoid, it’s important to familiarize yourself with the actual process of house flipping. Typically, house flipping is the process in which an individual invests in a home that is foreclosed on, dilapidated, or in need of serious renovations. After purchasing the property, the new owner or property investor will then take their time to remodel and upgrade various areas of the home with the hopes of increasing curbside appeal and the overall value of the home itself.

Understanding the ins and outs of the real estate industry, how to go about investing, and how to maximize profit is key if you’re looking to succeed as a house flipper yourself. Becoming familiar with traditional inspections, zoning laws, and whether you will require EIFS repair, or Exterior Insulation Finishing System solutions will also help you along on your real estate investment path.

Is House Flipping Generally Legal?

When it comes to learning about the fix and flip pitfalls to avoid, you will first need to better understand the laws surrounding the actual process of house flipping itself. If you’re a citizen of the United States, and you’re thinking of going into the business of house flipping, you can do so legally in all 50 states. In most instances, house flipping is entirely legal and an excellent method of generating an income or turning a profit when done correctly. However, it is also important to note that house flipping can be deemed illegal if a property is flipped and then listed at an extremely exaggerated price.

What to Consider Before Choosing a House to Flip

When you’re getting involved with house flipping for the very first time, you may be unsure of where to begin. Knowing what to consider before selecting a property to flip will help you gauge whether the property is a solid investment or not. While browsing homes or properties you’re interested in, consider the condition of the exterior, roof, interior, and whether you will require additional work, such as landscaping or even asphalt paving. Taking any and all repairs into account will help you to determine the risk of the investment and the repairs or upgrades you will require before you can place the home for sale on the open market again.

fix and flip pitfalls to avoid

Legal Funding Options for House Flippers

When you’re learning about the fix and flip pitfalls to avoid, it is highly advisable to take the time to determine how you intend to fund your house-flipping venture. Comparing legal and illegal funding options when it comes to house flipping can help you to ensure you are making the right decisions every step of the way. Whether you are in need of funding for an entirely new investment or for home upgrades and additions such as grinder pumps, there are a few different funding resources to consider based on your financial needs and your own personal qualifications.

Ask Family Members and Friends

Asking those you know for a loan can help to expedite the process of investing in a new home or property to flip. While the process may be easier, it can also include more strings and emotional risks. Keep in mind, when going the route of family and friends, you may also be held liable at a higher interest rate, depending on what you and your family member or friend agree upon when accepting the loan.

Seller Financing Solutions

Another option to consider when you’re in need of funding to flip homes is seller financing. Seller financial solutions are optimal for those who do not yet qualify for a traditional mortgage but are seeking expedited solutions. While seller financing is likely available to more individuals, it’s important to remember that you will likely be responsible for a much higher interest rate over time. In some instances, seller financing solutions may still turn down a loan application request due to the applicant’s current credit score.

Line of Credit/Home Equity

Depending on your qualifications, you may have the ability to take out a line of credit or request a home equity loan. With a line of credit or a home equity solution, take advantage of potentially tax-deductible interest payments and a lowered interest rate than with traditional funding routes.

401(k) Loan

If you are someone who has spent years contributing to your own 401(k) savings fund, you may have the option of borrowing against your own money to secure the funding you need to invest in a house-flipping venture. With a 401(k) loan, you are typically borrowing against your own money, but you can do so with a lowered interest rate. One of the most appealing aspects of a 401(k) loan is that approval is much simpler than traditional loan applications, as the individual borrowing with a 401(k) loan is doing so by borrowing their own money.

Illegal Funding Options House Flippers Use

When it comes to fix and flip pitfalls to avoid, it’s important to verify that you are able to obtain the funding you require for your investment properly and through the right legal channels. Whether you’ve recently sought funding for heating services you require for your investment or if you’re looking to purchase a new home or property, it’s important to do so while abiding by any real estate laws that are currently in effect where you live and intend to invest. Obtaining a loan under false pretenses and without disclosing that it is for the investment of a new property can lead to serious issues and potential fines. When working with a banker or loan officer, be sure to inquire about all of your options and how to go about best protecting yourself to ensure you are abiding by the law at all times.

fix and flip pitfalls to avoid

The Line Between Full Renovations and Incomplete Repairs

When it comes to various fix and flip pitfalls to avoid, understanding the line between full renovations and incomplete repairs is essential. As a house flipper, you will need to determine if your new property investment requires full renovations of entire rooms or simple repairs such as new window replacements. Spend time researching different options you have available as a house flipper and what is required of a house flipper in your area and within the state you intend to live and invest in.

Making a Fixer-Upper Safe for Habitation

One of the most important aspects of investing in and flipping homes is making the same habitable for new tenants. If you are learning about the fix and flip pitfalls to avoid when house flipping, ensuring your fixer-upper is safe should always remain a top priority. Not only should a home appear habitable and appealing from the outside, but its interior equipment, appliances, wiring, pipes, and more should also be in proper working condition.

Making a fixer-upper safe for habitation before placing it on the market for sale is possible by conducting a bit of research to determine what type of repairs or renovations your property will require ahead of time. From investing in a brand-new roof to tending to basement floor crack repairs, there are many different areas of a new home or property investment to consider before verifying that it’s safe and habitable for new owners or tenants. Always take the time to complete thorough home inspections to determine what type of renovations, repairs, or replacements are necessary before your new flipped home can be considered habitable and legally safe for tenants.

Property Title Woes

Dealing with property title woes can be much more challenging than addressing typical heating and cooling issues that are commonly associated with investing in and flipping homes. Property title woes can cause delays and even prevent you from making the repairs and upgrades you envision for your new investment. Anytime you are thinking of flipping a home or getting involved with real estate, it’s best to do so only after you’ve become familiar with the process of handling property titles.

If you’re unsure of where to begin when it comes to handling property titles of new investment properties, consider working with a professional attorney. An attorney who specializes in real estate law can walk you through the steps necessary to prevent the risk of property title woes throughout the entire purchasing process. Working with an attorney who understands the ins and outs of real estate law will also help to protect you from potential liability or financial risks when you choose to invest in property of any kind.

Unpermitted Home Repairs

Some of the most prevalent fix and flip pitfalls to avoid include unpermitted home repairs. Home repairs that are not permitted or cleared may need to be redone in the future, depending on any zoning laws, restrictions, or guidelines that are currently in place for homeowners and property owners near you. When you choose to work with general contractors while you are renovating and flipping a home, it’s important to find the right professionals.

How to Find the Right Contractors

Hiring contractors you can trust and rely on is much easier when you are able to ask friends, family members, and even neighbors for their own local recommendations. When searching for contractors to hire to assist you in your flipping venture, be sure to hire individuals or companies only after verifying that they are licensed, certified, and insured. Avoid hiring any general contractor that is not currently licensed and insured, as they are much more likely to put you at risk of financial lawsuits and legal liability if they are not properly insured to work on the property of a client.

You can begin searching for the contractor you’re interested in hiring with the use of local directories and listings and by browsing online. Search for contractors near you with search engines such as Google, Yahoo!, DuckDuckGo, and Bing. When browsing for a general contractor with the use of a network such as Google, you can instantly discover more information about the official website of the contractor while also browsing verified user reviews. Referencing user reviews can provide you with valuable insight into the type of quality of service that is provided as well as the overall experience of a contractor you’re thinking of employing yourself. The more time you take to get to know all of the options you have when it comes to contractors near you, the easier it will be for you to make a decision that you feel confident in.

Unlicensed Repairs by Novice Flippers

Anytime you are learning about the fix and flip pitfalls to avoid, it’s important to pay attention to the quality of work provided by contractors and construction workers you have hired or are currently employing. Unlicensed repairs by novice flippers can cause you to feel as if a home has been modernized, when it has only been partially updated with low-quality materials. When you’re in the market for a new home that you believe has also been flipped, take the time to inspect the quality of the plumbing, roofing, flooring, and other major renovations that have taken place before making your decision.

Selling Your Home? Beware of Flipping Scams

Anytime you are thinking of investing in a home or property to resell, learning about the common fix and flip pitfalls to avoid is essential before getting started. The more familiar you are with the most prevalent fix and flip pitfalls to avoid when it comes to house flipping, the easier it will be for you to navigate the real estate and house flipping industries on your own. Turn to local experts, including general contractors orĀ masonry contractors for support. When you know what to expect when it comes to flipping your next home, you can move forward with your plans feeling comfortable with and confident in all of the decisions you make along the way.

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