PDA

View Full Version : Flip that house



EmpirE231
04-11-2007, 03:43 PM
what kind of costs are associated with this type of investment (outside of all upgrades etc. done to the house) ... such as capital gains tax, supplemental, etc... and if you do a buy from owner type of deal (no agents) what are the ways to get that done, and how long does it usually take??
tryin to make a quick buck :)

al cole'holic
04-11-2007, 03:55 PM
what kind of costs are associated with this type of investment (outside of all upgrades etc. done to the house) ... such as capital gains tax, supplemental, etc... and if you do a buy from owner type of deal (no agents) what are the ways to get that done, and how long does it usually take??
tryin to make a quick buck :)
...sign is going up Friday on a flip we just finished! Closed escrow January 3rd and started with a complete overhaul job that included bullnose corners, can lights, whole new kitchen, master bath add on for a 2 person shower, all cabinets, doors, windows, granite, travertine floors, all new carpet, new duct work, switches and outlets, sod & sprinks, and a touch of concrete here and there. Had a budget of $50k which we came in under. The house was a roach and the asking was $499k, we offered $450k and he took it (nasty divorces are a plus when looking!). The listing price will be roughly $575k which isn't a buttload if it goes for that but is a nice piece of change. As far as taxes, we are gonna take the hit and add it to income for the year which will be due well into '08 so that was a factor, instead of a 1031. We have already scoped out the next project and have a list narrowed down to a few rough diamonds..hopefully it all works out. Being agents does help to keep the proceeds up though, but knowing agents is the next best thing ;)
If you or anyoned here are seriously looking into a "fix n flip" sitiation around the SFV, Ventura County areas let me know :D

soupersonic
04-11-2007, 03:57 PM
You can get a contract to buy the home at any stationary store and close when ever you agree to. I wouldnt worry about capital gains to much as you will have many receipts for repairs to the home to offset the taxes.

LhcBrad
04-11-2007, 04:06 PM
You want a challenge for a flipper here is one.

EmpirE231
04-11-2007, 04:07 PM
my buddies parents going through a rough time.. .divorce / pretty damn close to losing the house. nothing in the area for the same square footage going for less than 500k ... gonna see if they take my offer @ 400k ... needs some work... but since that's my dads profession... I assume I would go 10-15k out of pocket, where the normal person would be 30-35. might be able to profit atleast 70k or so (from purchase price + repairs subtracted from selling price) ... if all houses in same rage are @ 510... I would list it at 490 for a quick sale... and it has a nice pool / spa :D
we'll see if they go for it?? just wondering how much capital gains will rob me of the profits.

soupersonic
04-11-2007, 04:07 PM
You want a challenge for a flipper here is one.
Thats easy. Flip it into the dumpster and start over :D

HM
04-11-2007, 04:10 PM
tryin to make a quick buck :)
If you have never done this before, you will find that in reality it is a way to lose a quick buck.

dumbandyoung
04-11-2007, 04:13 PM
your in the wrong market place for that, you missed by about 2 years...
Although there are a few really good deals that come along here and there where you can make a little profit. If i find one Ill let you know.

soupersonic
04-11-2007, 04:25 PM
my buddies parents going through a rough time.. .divorce / pretty damn close to losing the house. nothing in the area for the same square footage going for less than 500k ... gonna see if they take my offer @ 400k ... needs some work... but since that's my dads profession... I assume I would go 10-15k out of pocket, where the normal person would be 30-35. might be able to profit atleast 70k or so (from purchase price + repairs subtracted from selling price) ... if all houses in same rage are @ 510... I would list it at 490 for a quick sale... and it has a nice pool / spa :D
we'll see if they go for it?? just wondering how much capital gains will rob me of the profits.
Repairs plus commission and mortgage payments for however many months is average for your area to sell, can eat alot of profit fast. Be carefull

Mrs. 20
04-11-2007, 04:39 PM
I love the show Flip that House! We have considered flipping houses too. I have a neighbor who does this. He is just holding them right now and renting them out until the market gets better.

2Driver
04-11-2007, 04:47 PM
Cost of the loan and monthly payments while it sits (figure 6 months to be safe) This could be a chunk.
Cost of repairs (you have to figure that) but add 20% to your estimate
10% off your asking price as the buyer will negotiate
6 or 7% of the selling price for real estate Agent
.5-1% or so for closing cost
15% for capital gains on the gain (lowest in years by the way)

CARLSON-JET
04-11-2007, 04:54 PM
Also add insurance, transfer fees, trash service. utilities and many more. I laugh when I watch those shows as they never really say the bottom line.. They just show fake inflated profit numbers. If you make 15% your not doing to bad. really... Some do better but they are very expierienced and have a good crew of people to pull it off. If you don't have alot of reserve money laying around for when things go wrong this is not for you.

EmpirE231
04-11-2007, 04:56 PM
I definitely know the market was better for this 2 years ago and so... I wouldn't do this on an average house.... if I do get this house... it would be wayyyy below market value. look up MLS and see any house in the 92508 zip code for around 2600 sq feet. nothing below 510k. and this one has a pool and spa, and excellent hardscape + landscape. I know what goes into these things for repairs. just got done doing a full 100% remodel on my house (which I actually still have a good 85k in equity from the time I bought it (sep 06) to today.. which is pretty good since the market has already taken a decent blow)
but definitely not going to make a decision like a dumb ass and get myself in some trouble... I do homework and play things pretty conservatively. unless I can walk away with 20k + after ALL costs... I most likely wont even do it.

locogringo
04-11-2007, 05:02 PM
Flips can be great if you know what you are doing.
You wouldn't believe how many houses we buy from so called "investors" who have no clue on what they are doing.
As long as you buy right, this is a GREAT market to get into.
It's all about buying right though and keep that in mind. Only deal with people who are easy to deal with (the sellers that is). If they aren't somewhat motivated, then alot of times, they aren't the right person for me.
such as capital gains tax
You will pay capital gains plus a 3.3% excise tax as well if not held for two years. There are ways around this though:
1. 1031 exchange
2. Buy the property from your ROTH IRA and never pay taxes on any of the profit.
and if you do a buy from owner type of deal (no agents) what are the ways to get that done
By a regular Purchase Agreement.
You can buy it subject to, outright purchase or through an Option Agreement.
How long does it take? You could technically buy a house and own it in as little as a day but typically expect on a 30 day period.
Here is the formula I use to Buy houses that need work when we pay cash or get financing...
The fixed up value x 70% - repairs = Offer Price. This is the highest we will go in buying this house.
Good luck in your future real estate transactions.
DB

Classic Daycruiser
04-11-2007, 05:20 PM
There are more than a few empty investments out there.
I've been living in my flip for 4 years.
If your looking to make a fast buck, sell pasties on the internet:D :D :D

Havasu Sun
04-11-2007, 05:25 PM
I'm not a flipper just a custom home builder. I have to agree with previous statements about the flip shows. The bottom line number they show at the end of the show is far from the amount of money the person doing the flip actually makes. Interest, real estate agent fees, over runs, and taxes take way more than you would think. The house you are talking about sounds like a winner but do your homework. Determine what work needs to be done, get multiple estimates from subs to determine the cost. Remember it is a flip not a house you are going to live in so purchase accordingly.
If you have any questions PM me.

Faceaz
04-11-2007, 05:38 PM
If it's any help, we bought a Scottsdale house in 2005 for 785k, sold 6 months later it in 2006 for 925k. After all our write offs we cleared 68k & we owe about 17k in taxes. We normally get back 5 to 10k on our taxes, so I look @ it like we made 30 to 40k - not much for having so much out there.

socalmofo
04-11-2007, 05:40 PM
I think your numbers are too tight.
Say you have a 500k Selling Price.
500,000
- 5% Agent Fee - $25,000
- $20,000 in renovation costs - $20,000
- Mortgage/Insurance payments - ($2500/mo x 6 months?) - $15000
- Closing Costs ( Say $3500) - $3500
- 3.33% California Witholding tax - $16,650
With just a few basic paramaters you are looking at an additional cost of $80,150 and then add your capital gains taxes.
You are already at a cost of $480,150. Doesn't leave you with much. Not trying to be negative, just realistic.

Wheeler
04-11-2007, 06:01 PM
I definitely know the market was better for this 2 years ago and so... I wouldn't do this on an average house.... if I do get this house... it would be wayyyy below market value. look up MLS and see any house in the 92508 zip code for around 2600 sq feet. nothing below 510k. and this one has a pool and spa, and excellent hardscape + landscape.
I have been looking for a house, in this area, what is the address?

Mandelon
04-11-2007, 08:09 PM
Flipping is hard to do in a declining market. That's what we are in today, all over the southwest anyway. You make your profit on the purchase price. If you can buy it 100K under market then go for it.
I have made good money, lost money and made no money doing them over the years. Market timing is important. Now is a risky time.
10% to sell it, commissions, escrow, title. ( get a binder )
Payments on it
payments on the money you borrow
rehab costs
Your time to do the work
Insurance,
property taxes
Risk
Paint and carpet aren't so cheap anymore, everything costs a lot more than it used to. Basic work will be $10,000 and closer to $30,000 if you do a lot.
If you can't make $25,000 for sure don't bother. Plus I believe any profit is taxed at regular income tax rate if you sell it in under a year. so there goes 30% of any profit......You can hide some other bennies in the costs if you are brave.....
It ain't like it is on TV. Buyers are scarce and looking for a deal, not wanting to pay top of the market. Don't look at what is for sale now, look at the solds over the past 90 days....

hava life
04-11-2007, 08:38 PM
The market is still dropping from what I see. If you are able to fix it up and sit on it for a year then it may be good. Just because the house is under market in your opinion you still have houses on the market that will be coming down on the price if the market continues the way it has been. If it is in a very desirable area that could be good, if it is just an average area it will be risky. If you have to count on selling the house so it will not be a burden if you have to make payments then this may not be a good time, but if you can make the payment if it does not sell then you may have an investment that could pay off. There are a lot of so called flippers that are really having a hard time with things right now. If you do it make sure that you have the money to hold on to the house if it does not sell. Look at the negative side of a flip in this market.

EmpirE231
04-12-2007, 09:02 AM
Thanks for all the feedback guys... some of you seem to have your stuff down.

Cole Trickle
04-12-2007, 09:17 AM
We watch the Flip that House shows alot and have noticed that in the last 6 months they just show projected profits but they have not been showing final numbers like they did a year+ ago.
Like stated I think the Market is too much of a gamble unless you really know what your doing and have alot of capital so you can sit on it.
I think they need to rename the show..."remodel this house and loose your ass"...lol:devil: :D

essexjet
04-12-2007, 09:20 AM
Go get your real estate license at put the 3% back into the house or your pocket:D

cdog
04-12-2007, 09:27 AM
Reasonably smart people will make money in any market.
Location is key.
Buy for the right price.
Any agent you use should have over 5 years of experience so they know how to sell a home in this market.
Do not over do the home or neighborhood.
Focus on fundamentals, Location, schools, collage's, jobs and shopping.
Carpet and paint do not increase a homes value 5x's.
Contractor costs must be reasonable.
Do not put a 50k kitchen in a 3 bed 2 bath home and expect to get your money out of it.
All those shows marginalize the hard work it takes to turn a profit.
Use a 1031 exchange to finance the next project or buy a rental.
I'm involved in a flip in Orange as we speak. Bank owned property.
I've done several in Costa Mesa over the years.
:)