Seeking tips to grow flipping business

[Ryan Mortti]

Good evening guys! So I wanted to share my story, first I have learned everything from this forum and want to thank this unique community for being so great! So I have been investing for 2 years and have mostly done house flipping. I purchased my residence and since flipped and have about 100k to invest. I've been doing houses around 50 and have made about 30k net on each on average. Due to me flipping full time and just starting my business I do not have a job per say, what is my best route to get financing for more deals and how can I start to implement multi unit rentals in my portfolio. I live in Wesley chapel Florida near Tampa and it is booming! Would love to learn about more deals and see how I can leverage my capital? Thanks for all!!

Ryan Mortti

[Michael Haynes]

@Ryan Mortti, Hello, I am a small, long time, Buy and Hold, Rental guy in Tampa. I don't know much about Wesley Chapel, but, I know it is a new town that has been growing for ten years. If you have been able to make such a living in two years with one Residence held for two years and Flips in a small town like that, then, do yourself a favor and "Don't Try to Reinvent the Wheel." I am also a Futures Trader and after studying and practicing for more than ten years with many different types of Trading Methods, I know that when you finally find the Time Frame and Method that fits your Trading Style..."STOP." You learned how to make Money and all you have to do is to repeat the process. Ca Ching! Do you watch any of the Flipper shows on TV? There are many different ones and all the lessons you need to learn are shown in one or another of their videos. Try this one 

https://www.youtube.com/playlist?list=PLoDpbJFFeuT...

The couple in Flip or Flop show their Flips that were winners and losers. They showed the one where they did not get an offer right away and they had to rent it. They apparently have very good Credit and a lot of Cash AND they use Hard Money Loans. Three questions, Ryan. Most people don't want to use the Tax-Free Sale of your Residence, every two years, because they have families and they don't want to move that much. Did you sell your Residence Tax-Free? Then, do it again. There is nothing better than tax-free Money. Secondly, are you doing 1031 Exchanges with your Flips? That involves lining up simultaneously, another property to Buy and you get to Defer the Tax on that Sale. You can leverage your Profit by not paying the Tax and do it over and over again until you have enough Profit to Buy a property that you want to live in for two years and then Sell it Tax-Free as your Residence. And do you know your local Loan Shark for Hard Money Loans? Using Hard Money puts more pressure on you to make the Flips work out and the last thing I want in my life, is, more Stress. My friend had 10 houses that he was fixing up to Flip in 2008 when the Economy Crashed. He lost all of them. Ruined his Credit, almost ruined his wife's Credit and the lesson that we both got was to, "Do one Flip at a time and make it work out before doing the next one." Wesley Chapel may be "booming" today and you have to be aware enough to see any trouble brewing on the Economic Horizon. 

[Ryan Mortti]

hey Michael thanks for the awesome reply and I agree with your entire post. I have not sold my residence due to the fact I would like to stay put for life. 5 acres is a privacy level I can't give up. Also I agree with what your saying what about doing maybe 2 at a time I think 10 is too much but buying one every 30 days after I'm putting one on the market would increase volumes. Any early signs I can look for to slow down so I don't get stuck with multiple properties? If I did get stuck should I then rent those? Any best bets on rentals? I would like some kind of monthly cash flow. Thanks again

[Dave Foster]

@Ryan Mortti and @Michael Haynes, no better place to play than right here in Tampa Bay!  Sounds like you guys are both swinging in your sweet spot.  I wanted to clarify a couple things about the 1031 that Michael mentioned.  As a flipper you probably do not qualify for 1031 exchanges on those properties.  

1031s are only for property you have purchased with the intent of holding for productive use.  Property that you purchase with the primary intent of reselling (value add flips) are considered inventory and not eligible for 1031. The other thing is that you do not have to simultaneously perform the sell and buy.  You must use a qualified intermediary but you have 45 days from the date of your sale to identify potential replacements and a total of 180 days to complete the process.

But the 1031 is an incredibly powerful tool that allows you to sell property and purchase new property tax deferred and use that deferred tax in the new purchase.  So that might be part of the solution to your financing issue - find a way to use the 1031 so that the deferred tax is adding buying power.  Along with that you may find more access to funding by changing your model from fix -flip to fix - rent -refinance and use cash out then evaluate for sale periodically. It will slow down business cash flow for personal use but can dramatically ramp up your investing cash available both from deferred tax and attractiveness to lenders.  And the bonus lies in appreciation that adds on to your return when you do sell.

[Ryan Mortti]

@Dave Foster

Dave thanks so much for the clarification. I am not too familiar with the tax side yet as I have not had to deal with taxes. The flips this year so far have been in my name so I will have to pay taxes coming soon. I purchased my second property 2 weeks after I closed on my first flip and it is on the market now. When does the 1031 come into play? Now or tax time? Also I have opened up a LLC and have heard getting s Corp status for the LLC can help some taxation as well. Thanks again for all !!

Ryan Mortti

[Dave Foster]

@Ryan Mortti, The 1031 is a "real time" process that impacts what taxes are due when that time comes.  A 1031 starts with the sale of a piece of investment real estate.  A qualified intermediary must be in place before that sale completes. And the 1031 ends with the purchase of the new real estate.   The form 8824 is part of your next tax filing so that you do not have to pay the tax on gain from the sale.

S Corp status can have an impact on taxation.  It is used to avoid self employment taxes.  However you trade that for extra tax fillings, employment concerns for officers and decreased attractiveness to lenders.  But there are certainly situations where Scorp status can be used effectively to shelter taxes.

[Aryelle Collins]

If you guys are looking to flip any houses I have plenty of dirt cheap properties for sale in Tampa and surrounding cities such as st. Petersburg, lutz etc

[Mark Parzych]

Your best bet for financing is to get private money. The more success you have the easier it'll get to find lenders who actually want to give you money. 

In my city we have a big self directed IRA company that does meet ups to bring the action and money guys together. That could be one of several routes to find private money.