Flipping as an agent, for a client

[Shawn M Hannan]

Hello All,

I've been working with a lower-income buyer who is anxious to stop renting and start building equity in her first (owner-occupied) home. Due to her income and debt-to-income ratio, she will definitely be going FHA, and her max sales price will be in the $50-60k range.

Independent of the above fact, I've been shopping for my first flip target.

I recently looked at a $35k property (in Northwest Indiana) with the aforementioned client, and she generally liked it. It is in need of a good bit of work, at least from a cosmetic standpoint. I asked the buyer if she would pay $50k+ for the property if it was in better condition, and she said she would. I'm thinking if I could get the property at below the asking price--let's say $30k--I could do some updates and resell it to the buyer. The primary focus of the rehab would be on ensuring it would pass FHA inspection, with any other cosmetic work filed under "nice to have."

This would obviously not be a project with a great ROI, but I do think it could make a little money. More importantly, it would allow me to execute my first flip with a pre-identified buyer. The experience of doing is of greater interest to me than the amount of money made on the deal.

My questions for the BP community are:

1.  The buyer has told me she would be happy and comfortable with this arrangement--me as seller, her as buyer.  Still, I would want her to have an attorney or trusted advisor, and I would want the whole thing to be as transparent and above-board as possible.  How do I undertake this endeavor in a way that would withstand ethics scrutiny, if any were to come?

2.  What other "gotchas" do I need to watch out for?  (Yes, I recognize the biggest one--that the buyer doesn't work out.  I'm looking for gotchas other than that one.)

Thanks!

Shawn