Anybody Flip Houses?

J87513

I've watched a few times a showed called "flip that house" or something like that, and people buy junky houses and put $24k into it and then turn around and sell it and make a good profit? Does anybody do that, is it really hard?

Stone Mountain

There's 'Flip That House", Flip This House", "Property Ladder", "Location Location" and a couple of others. My wife watches them religeously. Almostas much as I watch car shows.

It's easier in the States, because you can sometimes get a foreclosed house way below market value. However, here in Ontario, anyone who forecloses on a house MUST sell it at fair market value, deduct costs and what's owing on the mortgage, and give the rest to the old owner. No such thing, really as an abaqndoned property.
But, yes, soemtimes you can score a house, give it a reno and make some bucks.

Most of the people on these shows are amatuers, and they let their emotions or personal likes and dislikes, or especially their ego get in the way of doing the job. Plan the reno to the last`detail BEFORE you take posession, get the permits, line up reliable trades, and make sure you have the money. Then make your decor choices with a view to selling, get in and get out, and you'll likely make a few dollars.

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MattCoops

we flip houses with an investment partner
if you dont got the savings, strongly suggest an investor over a mortgage. Better to use someone else's money rather than your own.

it can be profitable

you have to be real judgemental about the properties you buy

best thing is to buy crappy houses in good neighborhoods

look for foreclosures and auctions to get the deals

strongly suggest using a realtor to help you sell
it will sell faster and higher using a real estate agent

you don't really need them to buy, if your savvy enough to hunt properties on your own

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osborn

It depends on what good maoney is to you. I looked into it. If you use cash it helps. If you finance its harder. With todays market you could have 2 or 3 mortgage payments more than you expect. Also theres the realtor commission. I can do better just doing what I do for Customers than I can doing the flip thing.

J87513

wow, thanks for the replies everybody. Well if I were to get into flipping houses, I think that is what this is called, I would buy the house without a mortgage to begin with, so I don't have to worry about having to pay for mortgage bills for a house that I will never live in. I don't like to be pressured, but that is just the way I do business . I think I would also estimate the building costs with the contractors and then in my mind double it.

Hum, maybe I should seriously think about doing this sort of stuff on the side. I think this is a good thread.

Jesse Benson

This is something i am going to try to do more of. The house i currently live in i bought for 23,000 added on and remodeled for about 60,000 and could sell for about 170,000 if the market comes back around. My brother, dad and i bought one in a small town, gutted and remodeled only working weekend and turned 54,000. From that experience i learned you need to do it fast or with an investor like stated above. Being that we all worked full time jobs it took awhile to complete so you end up paying to much in taxes, mortgage interst and so on. We still make decent money but learned alot from the experience. We did get lucky in the selling part. We listed with a realtor but were able to list a person as an exlusion so we didnt have to pay realtor fees as the person we listed as the exlusion bought it after 2 days on the market. I have heard a good way to find the deals it to work with a person at the bank so you can get leads on properties before they hit the market. I am not claiming to be experienced with this but this is what i have learned SO FAR

MattCoops

Another thing is that don't fall in love with property
its an investment
if you put too much into it, you won't make anything off it

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andybuildz

Well...I wouldn't exactly say I "flip" houses...Is that like flipping cows? LOL
But really...I kinda sorta do that. Cept flipping to me means doing it fast.
That show is TV..its not the real world. They don't tell you a whole lot of things like what they pay in closing costs etc etc etc.
They don't mention Capital Gains tax which is a REAL BIGGIE to consider. That alone can stop you dead in your tracks if you have to pay 40% interest.
You need the house to be lived in..by you...for at least two years to avoid CG taxes.
So what I've been doing is pretty much just that. I buy the cheapest hunk O junk in the very best hood (see my website). I llive in it and devote 90% of my time on it. I do next to no other jobs other than this one. I use loans and the monies from my last sale to do another move up to more and more expensive houses where my return looks like it'd be a real good one. Its hard to loose when you're on the north shore of Long Island and only 45 minutes into Manhatten.
I may not make any killings but I sure make a whole lot more money this way than when I work for customers which was mainly what I did/do for the past 30+ years and intermitanly do these "spec" houses if you wanna call it that. I usually live in one for about five years before I sell. All in all ...like I said I do a whole lot better doing this than working for customers and I didn't do bad when I do work for clients.
You just have to weigh it all out and do what youre passionate about and whats feasable.
When I sell this one I'll be taking in some pretty serious cash...for me anyway, and would love to do a buncha real quick flips but the Capital Gains thing really puts a damper on that idea so I have no idea where they're coming from on Flip That House.
BTW...my wife is a real estate broker for over 20 years now. Believe it or not that wasn't how I got this current house though.
Its a long story part of which is in my website.
Looks like I'll be going back to work in the real world and doing clients houses again VERY shortly as this house is just about sewn up.
My daughter will be out of high school in about a year and a half which is when we'll be selling and on to our next adventure....I think theres still a few left in me....I think

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Jeff (socal)

J8- I watch those shows alot and and alot of them are speculators. Except the guys in Atlanta (Leccima) and San Antonio (Montelongo). When they show the #s they dont really show everything, things like mortgage, closing cost, selling cost, holding cost and so on...

I think you live in California?. If you want to flip here you can do it but must buy it with a deep discount. You said no mortgage! do you mean like paying all cash????.. if you have 500K+ dollars to spare that would be nice.

I too want to rehab homes and flip them. Its my dream to have a construction company and real estate portfolios.

andybuildz

I'll say it again..if you wanna "flip" houses...check out Capital Gains taxes...that might stop you dead in your tracks!!

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HUDSONVALLEYEXT

I think all the numbers at the end of the show are bogus. I remember one episode they said the renovation costs were $15000 and the whole house got redone. After adding it up in my head there was not way it could have cost that it would have took more like 50k.

Danahy

Capital gains tax is a huge issue here... I also notice on those shows that alot of work is done by really small shady lookin' companies, that don't look like they can afford to pass up the work, even if it is paying for only half their wage.

J87513

What are "capital gain" taxes? I just wanted to know if people can make some extra cash by flipping houses. Yes I am in Ca.

ButlerDesigns

Capital Gains Tax is huge!!! If you buy and sell here in Virginia your home within 2 years, you have to pay Capital Gains taxes on the selling price. This is 28% . That right there stopped me from flipping beat up houses in my area. I Renovate all the houses I live in. When I say renovate I mean stripped down to the bare minimum. We are about to sell my house I have been in for 2 years a 5 months and will almost triple my profit after the big flip. My old house we sold after 3 years and I more then doubled that one. Sad part is making a house look good and asking a high price just ups the prices on the not so nice ones in the same neighborhood.

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J87513

But that is only for people who buy a house and sell it before two years of ownership. I'm sure that developers like Pulte and KBhome don't pay that much when they sell brand new houses in developments like in AZ and southern Nevada. I'm sure that there is some other type of taxation that they go threw.

andybuildz

As I stated before..I've been looking into it quite heavily being I "sorta flip houses" and would like to do it as a steady income after this one which will be the real big sale but if us libs and dems don't change things in Congress, capital gains in the immediate future gets a bit more erratic. If you are in a low tax bracket, it looks like 2008 is the year to collect your capital gains:

"The 2003 Tax Act’s provisions lowered the rates on long-term capital gains to 15% for taxpayers in the 25% bracket or higher and lowered the 10% rate to 5% for individuals in the 10% and 15% tax brackets, effective May 6, 2003, through December 31, 2008. This provision eliminated the five-year holding period rates of 18% and 8%. In 2008, the new 15% rate remains the same but the 5% rate drops to 0%. In 2009, the capital gain rates will return to the old 20% and 10% rates, and the five-year holding period rules and rates return. The act did not change the capital gain rates for collectibles (28%) and unrecaptured section 1250 gains (25%). The new capital gain tax rates apply to both the regular tax and the alternative minimum tax (AMT) calculations."

from: http://www.nysscpa.org/cpajournal/20...ntials/p36.htm
Be well
andy

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Jesse Benson

andy mentioned the 15% percent CG due to recent changes and that is a fact. One thing not mentioned ( true or not) told to me by my accountant as we sold a flipper this year is that if you hold the house for atleast one year you only pay 15% CG, if you sell it prior to one year it is considered a business transaction and you pay income tax on the profits, and of course the 2 year principle dwelling ( you live in it) is not taxed or CG's....all profit. If you wait a year to sell then you have weigh out interest paid on the loan vs. your 28% CG. Dont jump me as i am not an accountant, this is just what my accountant told me. I get confused with all this as different people hear and do different things. I say leave it to the accountant.

vonnys28

This is pretty much correct. Essentially you have long-term and short term capital gains. Short -term(less than 12 months) are taxed at your personal income rate. Long-term gains(greater than 12 months) are taxed at 15% unless your in one of the bottom two tax brackets which are taxed somewhat lower. There is an exclusion that says if you have have used the home as your primary residence, defined as living there 2 out of the preceding 5 years, you can exclude capital gain taxes up to a certain amount. $250,000 for single indivduals, and $500,000 for married couples.

I don't really understand the concern over capital gains taxes. A percentage of something is always better than 0% of nothing? Of course your time is worth money, so if your the one doing the rehab work, and it's taking up a significant amount of your time then I can understand why it might not be worth the effort. The key is to have multiple flips going at one time, with you subbing out all the work. As long as you hire competent individuals, and remain on schedule(easier said than done), it can be a quite lucrative business. Your particular market also can impact your success level, but if you price appropriately without trying to strike gold on one home, you can do quite well.

This is my anecdotal observation from friends, and associates involved in the business.

andybuildz

>>>>>I don't really understand the concern over capital gains taxes. A percentage of something is always better than 0% of nothing?<<<<<

Vonny...true dat BUT...one only has so much money so investing to get the biggest bang for your buck has to be well thought out obviously.
To me...sometimes its better to invest in one biggie...live in it while working on it "if possible" and in a a cpl of years sell. Of course you have to try and figure out what you might earn doing it this way vs many smaller flips. For me so far I can't imagine making more money doing smaller flips with all the hassle involved vs one biggie at a time.If I can figure making approx...say...$200K a year doing it this way than thats the route I spose I'll keep going untill I have enough capital to finally own one that stays mine and enough dough left to do several small quick flips.
I'd say on average I can pull about a 100K a year doing it this way minimally

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vonnys28

Oh, Of Course! Sounds as if you have a sound business model that's working for you so much respect. My contention was just that I didn't want someone to think capital gains taxes ,in and of themselves, should preclude them from trying out a flip. There's always at least a modicum amount of risk associated with any business transaction, but you weigh it with your potential return on investment. Capital gains taxes notwithstanding, there's big money to be made on flips. The horror stories come from people with no knowledge of how a construction site is run, and underestimating the amount of work involved. Good luck to you!