How can investors protect themselves when flipping homes

On Behalf of | Dec 16, 2021 | Uncategorized |

There is usually money to be made in real estate if someone has the right skills. There are numerous ways for someone to capitalize on their existing resources by investing in residential real estate.

Some people will buy properties to rent out to tenants, creating a stream of (hopefully) passive income. Other people will buy residential properties that aren’t in ideal condition, make some repairs and then resell the house. Flipping houses can be an exciting and dramatic process, which is why it is the subject of numerous reality television shows.

Those hoping to flip properties in California, especially in a competitive market like the Beverly Hills area, need to protect themselves so that flipping homes doesn’t become a source of financial and legal liability. How can you protect yourself from those risks if you would like to try your hand at flipping houses?

Be cautious about the properties that you buy

The value of real estate will fluctuate over time. Although property values tend to trend upward overall on a macro scale, fluctuations in the short-term are common and frankly unpredictable.

While there are signs of softening in the local real estate market, there is still a lot of competition and high prices attached to many properties. It’s crucial that those buying a home to flip buy the property at a price where they can reasonably expect to sell it for more in the next six months to a year.

Be completely transparent about repairs and property issues

One of the biggest risks involved in flipping houses is the failure to disclose known defects. When you gut part of the house to make cosmetic repairs, you might notice structural damage or issues with a major system, like the electrical supply.

If you do not repair those issues, you have a legal obligation to report them to prospective buyers. Otherwise, the people who buy your house could eventually take legal action against you for not disclosing those issues. Listing all the repairs that you’ve made to the property can also be a good decision. It helps inform buyers about why you have relisted the property for a higher price and it gives them an idea of the value they receive in the transaction.

Proactively protecting yourself when investing in residential real estate can make it less of a gamble, especially if it is your first time attempting to flip a house.

Beverly Hills Bar Association
Super Lawyers
The State Bar of California
Los Angeles County Bar Association
American Bar Association
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