This weekend, a company is coming to my town to hold a free seminar on “flipping” houses. According to our state’s Department of Labor & Industries, flipping is defined as owning a property for less than one year, making more than $500 in improvements, and selling the property with the intention of monetary gain.
The company in question has advertised in the past that you could earn between $3,000 and $10,000 a month with their program. Now they just say you’ll earn cash and build a massive residual income stream. It’s supposed to be pretty easy. Sound like a sweet deal?
Not so fast. Here’s the rest of the story:
1) While initial seminars are free, additional seminars cost $1,500. You’ll also be encouraged to invest in more training—up to $25,000.
2) Fox Business says that to make a living flipping houses, you’ll need to have at least half a dozen going at once. Other sources caution that flipping isn’t for the financially strapped—it requires cash reserves.
3) Even if you only flip one house per year, your state may consider you a “contractor,” which means you’ll need to be licensed, bonded, and insured with L&I. If the IRS considers you a “dealer-trader,” you’ll have to pay self-employment taxes.
4) This company has earned an F rating with the BBB, based on a government action alleging deceptive trade practices and consumer complaints reporting trouble canceling purchases and obtaining refunds. Always check the track records of companies at www.bbb.org before doing business.
According to MSN Real Estate, house flipping is not as easy as it looks on TV. They report that on the original video of the A&E reality show “Flip This House,” there was even a warning stating “Do not try this at home. It’s for trained professionals. You will lose money.”
Making money in real estate is possible. But like anything else, it takes time and effort. If you attend a seminar like the one described above, ask a lot of questions and read contracts thoroughly before signing. (Make sure you get the exact name of the seminar you attended.) Understand any cancellation clauses or refund policies too.