Ethical to purchase property with "insider information?"

2 Replies

Hello BP members!

A little background on my question: My father and I do a large volume of transactions at our real estate firm. It is of utmost importance that we not only follow all of the laws, but that we conduct our business in an ethical manner. We are well known in the communities we do business in and from time to time we here about certain real estate developments and opportunities. Right now, I know of a project that is being built in one of my target cities and I know that the property values of the surrounding properties are going to go up.

My question is, "Would it be ethical to purchase/market to the surrounding properties from owners that may not know about the future development?" Some of the properties that I have in mind are already for sale, but my specific question is directed at property owners that do not have their properties for sale.

Thank you for any advice.

If it's being built it's common knowledge!

If it's in the planning stage or the thinking stage, what you're doing is speculation. Nothing unethical about speculating.

Now, if you were told by the banker that the developer was planning a development and he would approve the deal, that gets into ethical areas, not from you so much as the banker! Disclosing borrower details is confidential information so the banker has other issues.

Being ahead of the competition, understanding economic effects of what may happen is just good business.

Unless you obtained the information from a confidential source you don't really have any ethical issues I see. :)

I agree with @Bill Gulley , if you aren't doing anything illegal it sounds like you've basically hit a jackpot of sorts.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here