Is there a limit... - Posted by Lesley

Posted by Dave T on June 24, 2000 at 16:44:37:

The question was “Is there a limit to the number of flips you can do annually?”.

You made an inference about IRS interest. Just in case you missed my response to Pavon in this same thread, my answer to your re-phrased question is: ONE.

Is there a limit… - Posted by Lesley

Posted by Lesley on June 23, 2000 at 22:31:50:

to how many flip deals you can do annually? Also, people keep saying that flip deals are illegal-what is the deal with this? Please shed some light on this subject.

Re: Is there a limit… - Posted by Craig

Posted by Craig on June 24, 2000 at 15:53:58:

Lesley who is this everybody that’s saying they are illegal? Most people have no clue what they are talking about when they say such nonsense. Buying low and selling high is not illegal with anything. That’s all flipping is. Sometimes you may only hold title for a few minutes and some title companies and lenders will be uncomfortable with that and may not work with you. But for everyone that won’t you can always find 2 who will, as long as there is money to be made.

What you ought to tell those folks that are misinformed is that you don’t flip properties. You buy at a good price and sell for a higher price. Ask them where they ever got the idea that such a thing was illegal. Tell them there have been some bad apples as with any industry that have been paying off appraisers for high appraisals, and forging documents to get loans approved, and having their cousin get the loan to purchase and split the profit with them, then bail on the loan(straw buying). These things are illegal whether a home is being flipped or not. Ask them if a used car dealer flipping cars is illegal. They buy low and sell high.

Lesley just ask those people exactly why it is that flipping is illegal? Their response will be enough to tell you that they don’t know what they are talking about.

Re: Is there a limit… - Posted by Pavon Bailey

Posted by Pavon Bailey on June 23, 2000 at 23:49:54:


I agree with DAVE T. There is nothing illegal with flipping properties for fast profits.

However, you may want to consult your attorney or tax advisor about flipping too many properties annually. The reason why is because you may be considered a “dealer” instead of an “investor.”

I hope that this helps out a lot. But flipping definitely is NOT ILLEGAL.

Have a great evening.


Re: Is there a limit… - Posted by Dave T

Posted by Dave T on June 23, 2000 at 23:26:01:

To the best of my knowledge, the number of flips you can do annually is only limited by your ability to close deals. Perhaps you have heard about a limit in a specific context. If so, please post again and someone can give you a more specific answer.

A flip is simply buying a property (at wholesale) and re-selling for a profit (at retail) within a short time. Nothing illegal about this at all. This is the cornerstone of our free enterprise system. The auto dealer, the department store, the grocery store, and any other retail business you can think of all do this.

The bad press lately about property flips involves certain activities designed to artifically inflate the appraised value and defraud the lender. The flip activity itself is not illegal. What is illegal is when the “flipper” resorts to fraud to facilitate the flip.

Re: Is there a limit… - Posted by paul

Posted by paul on June 24, 2000 at 18:14:33:

give the lady a cigar, what a AWESOME PERFECT answer,
kudos, kudos, and kudos. Man I really dispise people who use the term “illegal” because someone else is making more money and faster USING THEIR BRAIN instead of their sweat… just because they don’t understand it - it’s illegal man I am over SNIOP thinkers. What’s a SNIOP pronounced " sia nop " it is = Susceptabel Negaitive Influences of Other People. again awesome response :slight_smile:

You are a dealer as soon as you “flip” one. - Posted by Dave T

Posted by Dave T on June 24, 2000 at 14:40:00:

I believe that it is a misconception that there is a certain number of “flip” transactions one must complete per year before becoming a dealer. I contend that completing only one “flip” transaction qualifies that transaction for dealer treatment.

The IRS will examine the facts and circumstances of each situation in determining whether a person is a dealer to any property. Dealer-vs-investor status is determined on a property-by-property basis and NOT an individual-by-individual basis. While courts have traditionally looked at the number and frequency of sales, this is not the only test of dealer activity. The reason and purpose in acquiring the property, the length of time the property was held, overall reluctance to sell the property, the extent to which the taxpayer engaged in sales activity (improving the property, advertising, soliciting customers, etc.) are among the factors that are considered in determining dealer activity.

Re: Is there a limit… - Posted by Craig

Posted by Craig on June 24, 2000 at 15:41:49:

The question was “Is there a certain number of flips you can do before the IRS considers you a dealer?”