We have seen a rise in the “house flipping” trend over the last several years. House flipping is the process of buying a home, renovating the home, and then selling it for a substantial profit within the course of a very short time. Often, an investor is able to make money from flipping a house by fixing less costly cosmetic issues – such as carpeting, painting, and appliances – and then selling the house at a significantly higher price.
If you are an investor interested in house flipping, you should contact a knowledgeable attorney who can help with all aspects of your real estate transaction. Recently, several house flipping schemes aimed at potential real estate investors have come to light, exposing housing management investment companies and banks working together to defraud potential investors.
In one scheme, a Georgia Bank came under fire after the revelation that one of its co-founders and a chief executive was heavily involved in making fraudulent loans. Through the Bank, chief executive made short-term loans to inner-city investors interested in flipping house in low-income neighborhoods. Because the investors often did not have easy access to loans from traditional banks, the company charged hefty fees and exorbitant interest rates.
Another scheme in involved a European man who enticed flippers – for a substantial fee – with cheap properties and access to expert renovators. He then sent his investors to the Georgia Bank to obtain loans to buy his properties. Allegedly, kickbacks were paid to the loan officers at Georgia Bank who approved the funding. The European man is now in federal custody on charges of fraud. The European Man and the unnamed loan officer made money, but many of the properties were never renovated and the investors lost their money.
These flipping schemes have created additional problems in some of Atlanta’s most needy neighborhoods – with newly flipped homes sitting vacant and attracting criminals and squatters. Although many flipping schemes have come to light over the past decade, The Wall St. Journal reports that home flipping is making a comeback with investors buying up foreclosed properties. These flippers need “cold cash, lots of local-market knowledge and strong nerves.”
The best advice for real estate investors interested in getting involved in the flipping market is to do your homework, be wary of schemes, and be willing to take some risks. We can help you determine if the property you are interested in is suitable for flipping. However, if you believe, you have been a victim of house flipping fraud; please contact us immediately to discuss your case.
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