Is Transactional Funding Only Way to Avoid a Felony When Wholesaling Real Estate?
Is using transactional funding the only solution for escaping jail when wholesaling real estate today?
Despite single handedly bringing back the housing market and economy real estate investors are now being criminalized for recycling homes and aiding in the revitalization of neighborhoods across the U.S.
Investors around the country have been receiving notices that they are committing felonies when wholesaling homes. Investigators and the feds are picking up on their advertising, while jealous real estate agents, competing investors and even disgruntled home buyers and sellers are turning them in at a higher rate than ever before.
So what’s the problem? Will all investors be regulated into being felons and jailed by 2014?
Not all, but those flipping and wholesaling homes as well as some buy and hold investors could find themselves increasingly regulated and forced to adopt new strategies and business models or face some time behind bars.
For those that haven’t had the pleasure of getting to know the U.S. justice system yet, a felony means long stints in real big boy prison after a nice vacation in the hardcore level of the local county jail. Not a place many want to find themselves.
The main issue surrounds unlicensed real estate sales activity and advertising, both of which are currently under the spotlight of the IRS, FTC and other agencies and attorney generals.
Those marketing homes that they don’t own and have not closed on yet or when involved in chains of marketing for other investors is what is causing the most problems. Obviously this includes the strategy of a massive percentage of wholesalers out there today. So what’s the solution?
Fortunately there are several work-arounds including:
- Obtaining a real estate license (though this comes with many other risks too)
- Building a buyers list first, taking pre-orders and not needing to market homes at all
- Paying cash or using transactional funding for legitimate double closings
Some amateur self-appointed real estate investing ‘gurus’ advise simply getting permission to market before closing as a part of purchase contracts. However, this isn’t a solution by itself. You can put anything on paper but that doesn’t make it legal or protect you in court.
Do get permission to avoid issues, try new ways of marketing and check out transactional lending to fund your deals and achieve higher volume levels when wholesaling homes if you want to stay ahead of the curve and avoid the wrong attention.
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