Conflict of Interest?

I am a CPA and also a real estate investor. I've had multiple older clients this year that have said they just want to quickly sell their house and not worry about it. I'd love to buy these houses for cash, do some fixing, and re-sell them but I've instead referred them to a friend that's a realtor and it's so painful to watch. I'm worried it would be a conflict of interest to buy a client's house (at likely below market) and then flip it for a profit. Any thoughts? Is this a question for my liability insurance? Or is more of an ethics question?

Is this a question for my liability insurance? Or is more of an ethics question?

I don't think those are, necessarily, mutually exclusive.

That said, I would have a very explicit agreement outlining the responsibility of these clients to discuss the transaction with an independent tax advisor, if they want, as you will not be independent and definitely have a conflict of interest.

If you are going to purchase below market, that could be an ethics issue.

Why are they selling it below market? Because you're saving them the RE agent commissions?

You may want to check with your stste board but I am assuming with the proper disclosures you should be ok? How is this different from CPA's also managing client assets as a Financial Planner??

You can conduct business with a client outside of your normal and ordinary services. Cover your butt by requesting they have a third-party CPA advise on the structure/tax consequences and each use your own lawyer. Have it spelled out in writing how it would be handled, requires the client to utilize other professionals, why they're willing to sell below market, etc. It should be documented with a witness, IMO, in case any potential beneficiaries decide to take issue with it down the road.

Why are they selling it below market? Because you're saving them the RE agent commissions?

Ye. It would likely be below market value due to no realtor fees. But also because I live in one of the many hot areas of the country and places are going for way over appraised value. The client could very well likely get a lot more money listing the property than selling it to me...

Thank you all for your thoughts on this. Definitely something to consider going forward.

How was the value determined? Is the client 100% mentally sharp without question? If the CPA is instructing a client while they are also the buyer, that's a major potential conflict. I'd want an outside valuation performed on all deals and it looked at by a third party. If the client died in 6 months and now a beneficiary wants to review the transactions, would have be 100% comfortable a third party would be fine with the value paid, the closing procedures and the way you offered tax advice on the transaction?

How was the value determined? Is the client 100% mentally sharp without question? If the CPA is instructing a client while they are also the buyer, that's a major potential conflict. I'd want an outside valuation performed on all deals and it looked at by a third party. If the client died in 6 months and now a beneficiary wants to review the transactions, would have be 100% comfortable a third party would be fine with the value paid, the closing procedures and the way you offered tax advice on the transaction?

Exactly. I think I'm just going to continue steering clear. Not worth the headache and worry.