Comments on: Financing House Flipping

By: ti

ti — Thu, 18 Feb 2010 07:28:55 +0000

if you want to be a flipper you must realize the capital gains. Unless, you plan to live in the house for 2 years there is no real way of avoiding paying Capital gains which I believe is 30% of profit. yeah I know it sucks but it will pay off if you learn to reinvest in properties. Its also and advandtage to form a llc. (you can do this all online for 150.00 bucks just for personal protection ect,,,,and yes it will help using this for a tax purposes. We just recently got into flipping and wish you luck. Also, thanks for the information here.

By: Samantha

Samantha — Mon, 09 Feb 2009 16:13:40 +0000

I just found this site today and was happy to find some realistic flipping info. We have renovated our own home, flipped one, and are currently purchasing another to flip. For this one we will need some financing and one of the places I was considering was Brookview Financial, which I see someone else mentioned. Can anyone let me know what their experience with them has been like? I’m a little leary of going with nonconventional financing. BTW – we have great credit but mortgages on investment homes right now are crazy even with good credit – 2 pts up front and 6.68% – that’s why I started looking into the rehab loans. I don’t mind paying a higher interest rate (since we will probably only own the property for 5 months or so), but I do not want to pay up front points. Thanks!

By: Angel Lalama

Angel Lalama — Thu, 13 Mar 2008 03:48:51 +0000

Hey people,
Great to find this blog, hope to learn some stuff. Quick background…23 years old. Real estate agent and soon to be general contractor (test in a couple months!). I am a good amount of knowledge in both sides of the fence, yet I know i have a long way to go. So here is my question, hope someone can answer it. I am at the end of negotiations in a home in Los Angeles and are about to enter escrow. I will be putting about 65,000 down and the rest will be owner financing (150,000 left). The house needs a lot of rehab and the owner quite too old to get involved in it. Anyways, I plan to start a company at one point for flipping houses but will also try to hold some other properties for some positive cash flow. Real estate to rent and other to flip. As for tax purposes, what would be best, buying this home as myself or set up a corp. for it? I heard you can write off more stuff if it is a corp, but wouldnt I be taxed double once the gains go to my corp then is paid out to me? perhaps it is best to just take title as myself and just pay the tax and continue? especially since it is my first one? Any advice would be great!

By: dan

dan — Tue, 26 Feb 2008 23:16:17 +0000

Justin, I too am 18 going on 19 looking to flip my first house. I was wondering if theres anyway I can contact you, instant message, email anything like that. Were probably kind of in the same boat as far as how were starting out, so it would be cool to bounce back stories and info of what were doing.

By: Seth

Seth — Sun, 05 Aug 2007 12:28:14 +0000

Fred,

For a flip that’s not your principal residence, you’re going to get hit with capital gains taxes on any profit you make (something the myriad of house flipping shows on television never bother to mention). Here’s a quick overview of the various capital gains rates:

http://www.bankrate.com/brm/itax/tips/20010305a.asp

Depending on how long you own the property, you can also possibly do a 1031 exchange, assuming you’re in a position when you can re-invest all of the profits in a new property. 1031 exchanges aren’t
t good for quick flips, though, as the IRS frowns upon that, and people recommend you hold the house for 1-2 years minimum before pursuing a 1031 exchange.

By: Fred

Fred — Sun, 05 Aug 2007 04:14:23 +0000

I’ve flipped 2 homes so far, but they were homes that I actually lived in for a while, renovated and than flipped (and moved into another fixer upper). Made some real good profits. Now I want to actually flip a home without living in the home. Just wondering how I will be taxed on this?, as it will not be my primary residence.
Any info will help!

By: Paul

Paul — Wed, 11 Apr 2007 21:57:13 +0000

Hard money lenders used to loan based solely on the property;s ARV, but now it seems they want all your credit info just like a bank. I use http://www.BrookviewFinancial.com which finances up to 75% of ARV including rehab costs.

Also, might want to consider using a flat fee listing service to get your home in the MLS. This is hybrid between FSBO and full MLS since you only pay one-half the commision

By: Justin

Justin — Tue, 20 Mar 2007 14:29:06 +0000

Thanks Seth, now that you mention that I think I may know someone. There is an old man my dad knows that used to give out loans to everyone at a pretty fair interest rates back in the day. He gave people loans for cars, land, houses, and other things. I remember my dad saying about a year ago that he stopped loaning money for anything but real state because if someone can’t pay, he has something with a little bit of value. I guess he is a hard money lender…or the loan shark of my little town. I am going to go to the bank today and TRY to get a loan for all of it and if it doesn’t work, I might give him a call.

Once again, thanks for all of the advice. I’ll keep you informed of how everything works out.

BTW, are you guys on any kind of forums for flipping houses? If so, i’d like to join em. Thanks

By: Seth

Seth — Tue, 20 Mar 2007 14:04:16 +0000

Justin,

Hard money lender is just a fancy term for a private lender. Someone who has money sitting around and who is comfortable loaning it to people who can’t (or don’t want to) get a loan through normal means, such as from a bank or mortgage lender.

Most hard money loans are to people with less than stellar credit, but some investors with perfect credit use hard money loans as well, mainly because they can get a loan for the full amount of purchasing the house, closing costs, and renovation costs. Hard money loans are almost always higher interest rate loans, but they’re usually not insanely high. I’m just guessing, but you’d probably be looking at something in the range of 12-15%.

Finding a hard money lender is the hard part, as they don’t really advertise and you can’t look them up in the yellow pages. I’ve never gone this route personally, but in doing research I’ve seen people recommend talking to the following sorts of people, if you’re looking for a local hard money lender:

Accountants (if someone has enough money lying around to be a hard money lender, they likely have an accountant, who can possibly put you in touch with a client who does hard money loans.)

Lawyers (hard money loans involve drawing up legal agreements and contracts, so again, lawyers may have worked with hard money lenders in the past.)

Real estate agents (ditto the above, as far as past experience working on deals that involved a hard money lender as the financing source.)

By: justin

justin — Tue, 20 Mar 2007 05:10:38 +0000

yea, i might look into selling through a real estate agent, but i might have it for sale about a month or two on my own first. If i don’t get any bites, I’ll go from there. It took me about 3 days to find the house actually listed when i was looking for it specifically by address. I think if i place an ad in the paper for a while maybe people will actually see the darn thing. I can’t believe how awful of a job the real estate company is doing in promoting the house. (but it might be good for me, lol)

As far as the stainless steel…I have priced things at the store I am going to buy from and I can get stainless steel things for the same price or just a few dollars above plain old white things. They have a stainless steel range with a lower cooking drawer, glass top, and digital display for only $409.98 So i think it’d be worth the extra cash to throw that stainless stuff in, It would appeal to a larger crowd and be something that anyone would love about the house.

As for granite…I completely agree with you on that one. I dunno if I could ever make myself do granite even in a nicer flip house. I will most likely go with some “simulated” granite I found at another local store. It looks pretty close to the real thing for just a whopping $10 a foot, it looks amazing.

And since there’s a pretty good chance you’re right about me not being able to get a mortgage+renovations loan, do you think I should try getting a loan from a hard money lender? I have never heard of such a thing…any references? any downsides (besides incredibly high interest rates I’m guessing)?

Again, thanks for all the help Seth. I appreciate it.