Reality TV shows about house flipping have turned this once quiet industry into a niche full of drama and criticism. I realize that makes me sound like an old grump, but I can’t help it. The number of times small business owners have had to deal with the “is house flipping ethical?” question makes me think it’s time to take a stand and explain how this business works.
Saying house flipping is an unethical business is both unfair and untrue. I’d argue it’s one of the best businesses for a local community to have due to the nature of what a house flipper can deliver to the marketplace.
I want to take this moment to help those who think the fix & flip business model is predatory to reconsider their stance. Also, if you’re a flipper out there who’s afraid of the potential criticism, hopefully, the points I lay out below can help defend your business. Let’s dive in.
The Argument Some Have Against House Flipping
The main arguments people have against flipping come down to two things: price inflation and gentrification.
Price Inflation
Price inflation is assumed because people think the flipper buys a home for a “steal,” throws a coat of paint on the kitchen cabinets, and lists it for a huge markup. The poor potential homebuyers can no longer afford that home of their dreams because of the mean old house flipper.
If that’s how fix & flips actually went, we’d all be flipping multiple houses daily! The truth is flipping a home is a tedious process that involves lots of work, money, frustration, and time you don’t see from the outside.
Now, in the interest of transparency, let me say that yes, there are shady flippers out there who will try to cut corners. However, those businesses typically end up folding because no one buys what they’re selling, literally and figuratively.
Taking Advantage?
Also built into this idea of price inflation is that you’re a predatory shark waiting for someone else’s misfortune so you can buy a house for cheap. The idea that you can profit off this is considered unethical by some.
In reality, every house flip I do is meant to be a win/win situation. The people I work with need to sell their homes fast because they need the cash or can’t afford it anymore…but their house isn’t at a place where it can be thrown up on the MLS and sold for full market value!
Think about an elderly woman who needs to go into a nursing home. She can’t take care of her house any more, and she needs the cash for her nursing home stay. In many cases like this one, the house won’t be up to FHA standards—meaning no conventional bank will lend money to the buyer for this house.
This lady needs cash, and a fix & flipper can provide it.
Gentrification
Gentrification is a more complicated topic that I feel is unfairly used against house flippers. “Gentrification” is used when developers move into an established neighborhood and attempt to upset the local “culture” for a profit. Older properties are razed and replaced with modern, expensive houses.
Because the old homes are no longer there, the property values skyrocket due to these new giant McMansions (or townhouses or condos. You get the idea). Families that have lived in the same home for generations are suddenly unable to afford to live there and have to move. The community that once was is replaced by newcomers who don’t respect the “old ways,” and suddenly, the charm that once was is now gone.
Gentrification isn’t what house flippers do. It’s what property developers do. House flippers focus on restoring a single property and, frankly, usually aren’t interested in as massive a project as tackling an entire neighborhood. Instead, that old abandoned on your street that no one cared for is revamped and brings new life into the community. When an old, decrepit home is given a second life, it raises the curb appeal for the whole street. With the curb appeal increased, others are motivated to start taking better care of their homes. Crime is reduced, and communities are re-established.
Why House Flipping is an Ethical Business
So now that we’ve covered what misconceptions many have about house flipping businesses let’s talk about the good things they do.
House Flipping Revitalizes Unloved Homes
Contrary to what you might think, house flippers aren’t taking away perfectly good homes from would-be homebuyers. Many flippers will avoid properties listed on the MLS altogether since there’s little room for profits.
Instead, house flippers look to homes that are off-market and in need of repair. They pay a fair value to the seller and invest time, money, and effort to revitalize the house. The home is then sold as a turnkey solution for potential buyers who previously wouldn’t have had the chance to buy the home at all.
The Neighborhood Property Values Increase When a Home is Flipped
Ever see a zombie home in the middle of a neighborhood? It’s an eyesore that is like a bad stain on the street that no one wants to deal with. Abandoned houses can also attract the wrong crowd like squatters or hard drug users, which makes the neighborhood less safe.
On the other hand, house flippers take those unoccupied homes and rehab them into more appealing properties that are quick to sell. As a rising tide lifts all boats, a revitalized home lifts the desirability of a neighborhood. That desirability leads to property values increasing and, thus, more equity for all homeowners.
House Flipping Keeps the Human Side of Home Buying or Selling
Companies like Zillow are now getting into the game of flipping homes, which can disrupt the marketplace. Buying a home is stressful enough, and adding the bureaucracy of buying it from a corporation won’t alleviate that stress. Quite the opposite! Imagine having to ask Zillow to come down on the price because of things found during an inspection. Who would you talk to? A real estate agent who reports to a middleman who doesn’t care?
Keeping humanity in home buying or selling makes more of an impact than you know. Not only is it easier to deal with a house flipper who’s local, but you can also get critical information like upgrades, issues noticed, etc. that corporations just won’t have.
House Flippers Help Keep Communities Thriving
A house flipping business is a small business focused solely on a few very select geographical areas. House flippers employ local contractors, real estate agents, lenders, title companies; basically, anything that’s involved in the process of flipping a home comes from the local economy. The more money put into a local economy, the more the area thrives. This means that flippers contribute to the local economy much more than the global and help raise the standard of living for everyone who lives there.
Final Thoughts
I hope this article has been helpful if you’re thinking about becoming a flipper but are afraid of what people will say. Use any of the points above to help support your decisions if you like. Above all, remember that no matter what anyone else says, it’s your life and your business; if they’re not paying the bills, their opinion doesn’t matter.
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