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My first flip...

Discussion in 'The Lounge' started by Crashby, Oct 3, 2005.

  1. Crashby

    Crashby Monkey

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    After a year of building capital, researching the real estate market, and securing my 'team' (realtor,attorney, tax accountant), I finally pulled the trigger, and purchased my first flip property.

    The house cost $34,900 and I plan to put $6,500 into it (inc. materials and labor). I have already 'contracted' work for about 70% of the tasks. I and a buddy of mine with finish the remaining 30%.

    I hope to get the all work done in 3 weeks, and sell it for about $67,000. Should be fun.

     
    #1 -   Oct 3, 2005

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  2. Echo

    Echo crooked smile

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    Nice jorb dizzle :thumb:
     
    #2 -   Oct 3, 2005
  3. jacksonpt

    jacksonpt Turbo Monkey

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    Good luck...
     
    #3 -   Oct 3, 2005
  4. TreeSaw

    TreeSaw Mama Monkey

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    Sweet! Good luck :thumb:
     
    #4 -   Oct 3, 2005
  5. narlus

    narlus Eastcoast Softcore
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    be careful w/ inverted manuevers :D
     
    #5 -   Oct 3, 2005
  6. biggins

    biggins Rump Junkie

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    remember to spot the lander on your way around and never take your eyes off of it.
     
    #6 -   Oct 3, 2005
  7. N8 v2.0

    N8 v2.0 Not the sharpest tool in the shed

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    Sounds fun! I watch a 'reality' show on TLC or Bravo (can't remember which now) about flipping. Seems to be a had way to make a few grand to me.

    I like building homes from the ground up and make mucho dinero...

    ;)
     
    #7 -   Oct 3, 2005
  8. pixelninja

    pixelninja Turbo Monkey

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    Good luck! The wife and I are planning on giving it a go next year.

    I'd love to hear about the process as you go along, i.e. what worked, what didn't, what you'd do different next time, etc.
     
    #8 -   Oct 3, 2005
  9. JRB

    JRB Guest

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    Why are you talking like manziman???
     
    #9 -   Oct 3, 2005
  10. douglas

    douglas Chocolate Milk Doug

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    yeah.......keep us updated !!
     
  11. TreeSaw

    TreeSaw Mama Monkey

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    and lots of pics too...Crashby's handiwork is :thumb:
     
  12. Heidi

    Heidi Der hund ist laut und braun

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    Sweet - we're working towards the same thing so I'll be interested to see how it goes for you.

    Where is the property located?
     
  13. Tenchiro

    Tenchiro Attention K Mart Shoppers

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    Apparantly I need to move to NY... Talk about reasonable real-estate prices.
     
  14. hooples3

    hooples3 Fuggetaboutit!

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    i am still in shock that you can buy a house for $67,000. That less than my downpayment
     
  15. N8 v2.0

    N8 v2.0 Not the sharpest tool in the shed

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    Some questions:

    Do you have to offer any kind of warranty to the people you sell it to?

    Do you have to be licensed as a home renovator contractor by your state or do you have to have the work done by one?

    Do you have to carry any kind of liability insurance? This is my biggest overhead cost annually... :dead: But it's good to have if you get sued.
     
  16. Konabumm

    Konabumm Konaboner

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    I'll give you 1 million dollars
     
  17. Brian HCM#1

    Brian HCM#1 MMMMMMMMM BEER!!!!!!!!!!

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    $34,900 thats awesome, the concrete patio pour alone at my sister-in-laws backyard was $30,000.
     
  18. narlus

    narlus Eastcoast Softcore
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    in NY it's considered gauche to mix semi-precious stones into the cement.
     
  19. N8 v2.0

    N8 v2.0 Not the sharpest tool in the shed

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    That's a lotta concrete at $80/yard....
     
  20. Crashby

    Crashby Monkey

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    Ahhhh, all those questions I have been addressing over the past few months.

    Warranty= no - not in upstate NY...

    Licensed = no - as long as the work is done with proper permits and everything up to code, and ultimately passes any inspection done for the future buyer... all is well...

    Now... insurance... - What makes my plan so appealing is that I can re-do the whole house for $6500. Many reading that would think I'm crazy, but that will be the cost. Now, that cannot be done with licensed, insured, bonded contractors as they cost anywhere from $30-60 per hour. I hired a team of "handymen" who will work for $12/hr (heavily referred to by my Realtor). That plan keeps my costs way down, and more profit for me.

    As far as why I don't do new builds... this is my 1st project, and only had 50k to play with... besides, I'm looking at a 50% return on investment in about 2 months with only about 60 hours of my personal time at the property... not too shabby. I will move on to bigger things in due time. ;)
     
  21. Brian HCM#1

    Brian HCM#1 MMMMMMMMM BEER!!!!!!!!!!

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    It was a sh*t load and some was poured @ 10" thick for the huge trellis it supports. Its colored & stamped.
     
  22. Brian HCM#1

    Brian HCM#1 MMMMMMMMM BEER!!!!!!!!!!

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    @ $12 an hour watch it!!!!! Sometimes (most of the time) it's better to pay a licensed contractor to do the work properly. For one you have recourse if they F up, and trust me, when the house sells and the new buyer has a home inspection they more than likely find ALL sorts of flaws in their work in which you'll have to pay someone again to do the corrective work. Trust me, I've seen it all.
     
  23. Crashby

    Crashby Monkey

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    I hear ya... my realtor has done 40-50 of these flips, and has used this guy for about 10 of them... they all sell w/in a week or two.

    Certainly more risk here... but thats where large rewards may lie...
     
  24. Brian HCM#1

    Brian HCM#1 MMMMMMMMM BEER!!!!!!!!!!

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    Just make sure they do EVERYTHING up to code, it will be a nice profit if everything works out as planed.
     
  25. ghostrider

    ghostrider 7034 miles, still no custom title

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    The federal gov-ment will appreciate their portion of your profits. Sounds like they need the money, too.
     
  26. OGRipper

    OGRipper Turbo Monkey

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    If you flip it into another investment property you can defer a lot of the taxes indefinitely, so the government doesn't get as much as you think. It's called a 1031 "like kind" exchange (Section 1031 of the IRS code). Also works for your residence. You have a period of 6 months (I think) between the sale of one and the purchase of another.
     
  27. Brian HCM#1

    Brian HCM#1 MMMMMMMMM BEER!!!!!!!!!!

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    If you do a 1031 exchange I believe you have like 90 days to reinvest the $ without having to pay taxes.
     
  28. Heidi

    Heidi Der hund ist laut und braun

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    But, the IRS stongly frowns on you for not holding the property for at least a year in a 1031.
     
  29. douglas

    douglas Chocolate Milk Doug

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    Requirement that property be identified and that exchange be completed not more than 180 days after transfer of exchanged property
    For purposes of this subsection, any property received by the taxpayer shall be treated as property which is not like-kind property if—
    (A) such property is not identified as property to be received in the exchange on or before the day which is 45 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
    (B) such property is received after the earlier of—
    (i) the day which is 180 days after the date on which the taxpayer transfers the property relinquished in the exchange, or
    (ii) the due date (determined with regard to extension) for the transferor’s return of the tax imposed by this chapter for the taxable year in which the transfer of the relinquished property occurs.
     
  30. ghostrider

    ghostrider 7034 miles, still no custom title

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    Well, that clears that up. The point being that the tax laws can take a good portion of the fun out of real estate transactions. I propose he buys a fixer 1979 Porsche 911 Turbo after he sells the house and tries to pass it off as a "like-kind" investment.
     
  31. Crashby

    Crashby Monkey

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    Yep... The 1031 can be a powerful ally...

    I meet with a high powered tax accountant next week. There are lots of fun things you can do with your money... especially when you do everything through a corporation. I intend to incorporate by the end of the year.
     
  32. N8 v2.0

    N8 v2.0 Not the sharpest tool in the shed

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    I set up my biz as an S-Corp and as an LLC. Has advantage for me anyway.
     
  33. OGRipper

    OGRipper Turbo Monkey

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    Thanks, I was pretty sure about 6 months but forgot about the indentification part.

    And Heidi good point, I'm pretty sure the "frowning" you mean is that you are taxed at ordinary income rates rather than capital gain rates if you own it for less than a year. I am not sure if 1031 allows deferral of ordinary income or just capital gains but it's something to check out if it's a short-term investment.

    On that note, I hope that nobody out there is going to rely on tax advice from a bunch of bike geeks! Talk to a pro....
     
  34. Crashby

    Crashby Monkey

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    Protection against personal liability is the really big thing for me.

    Because yes, my $12/hr workers are not insured. Im OK on this 1st house because I have no "pattern" of doing this commercially. For all they know, this will be "ocassional work" for a "rental property", which is covered under my $500,000 liability clause under the home-owners policy. But, as soon as a pattern develops, no dice.
     
  35. N8 v2.0

    N8 v2.0 Not the sharpest tool in the shed

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    Yes as it should be. My liability insurance makes me hire only subs who are carry the same level of liability insurance that I do and workman's comp as well. It is no fun when a 'workman' or one of his flunkies, falls off a ladder on your job and files a claim against you.

    :dead:
     
  36. Crashby

    Crashby Monkey

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    I think it might make sense to have 2 companies... one to hold zero assets except for the riskier flip house, and a second to hold larger, fully insured assets... and then transfer wealth back to me as needed from these two companies(via salary or a drawing account). What's your opinion on that strategy?
     
  37. N8 v2.0

    N8 v2.0 Not the sharpest tool in the shed

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    Sounds like a lot of accounting and paperwork to me but might work.

    What I do, is keep only what I need to operate my company in the LLC. When my savings account builds up, I transfer the cash to my personal account as a dividend. Since I have an s-corp, I pay taxes on my biz through my personal income tax.

    If sued, the most anyone could collect would be the assets in the company's name which are minimal.
     
  38. Crashby

    Crashby Monkey

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    Bingo!
     
  39. bluebug32

    bluebug32 Asshat

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    wow, I was expecting a pic. of a biker that crashed and landed face down in the dirt.

    Real estate isn't good for as many laughs....
     
  40. Crashby

    Crashby Monkey

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    Wanna bet?... :)