Fix-and-Flip
September 2, 2022

How to Legally Start a House Flipping Business

Starting a house flipping business is an exciting venture for any investor. Even if you’re financially stable, it can still be challenging to invest your money in a project you don’t know exactly what it entails. From researching potential properties to making sure you have the necessary skills and resources to make a profitable business out of it, things can feel daunting when looking to start a house flipping business. This article covers everything you need to know before starting your own home flipping ventures.

What is a House Flipping Business?

A house flipping business is an investment where you buy and flip houses at a profit. The idea is to buy properties that are in good condition and then make them look better with cosmetic renovations. There are a few things that you need to know before starting a house flipping business. To begin, you need to understand this business model. The best way to explain it is by using an analogy to car sales. First, you find a property that you think has potential to flip. This is the “car” you’re buying. It needs to be in good condition with decent potential to increase in value. You then make the “car” look better with cosmetic renovations. You can do this yourself or outsource the work. Once the “car” has been modified and looks better, you then sell it to a new owner.

How should I legally set up my business?

The basic advice for any venture is simple - protect yourself. You can do this by setting up an LLC that separates your personal assets from those of your business. Setting up an LLC is simple and fast, with fees varying from state to state. Private money lenders prefer, and often require, that the borrower operates under an entity. This allows the hard money lender to conduct their lending business outside the bounds of consumer lending. The loans they originate will be strictly business-purpose loans. This eliminates the red tape associated with consumer loans that slows down the lending process. 

Conclusion

If you have the right resources, experience, and commitment, you can make significant money through flipping. Once you’ve learned all you can about flipping, it’s time to get your hands dirty and start flipping houses. But first, make sure you are properly protected by operating under a business entity.

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