Newbie from Minnesota Looking to learn!

[Shaylan Hurley]

Hi! My name is Shaylan Hurley and I am from Minneapolis Minnesota! I am brand spanking new to this whole real estate extravaganza and am extremely excited to start hustling! Currently I am a data and analytics consultant. My goal is to find a good house to either flip or rent. I am getting married in May to the most beautiful girl in the world! We are first time home buyers. We realize we have a ton to learn, but are extremely thankful for Bigger Pockets and all of the knowledge it has provided us so far. My friend referred me to the podcast and I have been hooked! Currently I am struggling to figure out which strategy to pursue rent or flip for our first home. I would love to buy someone in Minneapolis coffee and learn from them on how they suggest we go about doing this! Thank you in advance to whoever responds to this! - Shaylan

[Marc Jolicoeur]

@Shaylan Hurley  If you live in your flip make sure you own it for two years before selling. That way your capital gains are not taxed. If you want to rent it out while you own it, make sure you end up living in it for 2 years of the first 5 years, and sell within 5 years to avoid tax. 

The key for this strategy is to not overpay for it.  Currently inventory is tight so you have a lot of competition when you buy fixer uppers even.  So, when you buy ask your agent to estimate the after repaired value based on comps.  Then, make sure you factor in the additional investment for your repairs, and make sure you pay low enough to make a spread.

For example, lets say you are looking at $250K homes that need $20K of work.    $250-$20K = $230.   Lets say you want a minimum of 20% margin when you sell in two years.   So, pay no more than $180K.

In two years hopefully the market has appreciated or at least followed inflation and now those $250K houses are worth $275K and you are easily able to sell for $275K since your place is nice and updated.   After you pay realtor (6%) and closing costs (4%) for the buyer you should be able to net $248K.   Your profit of $48K is tax free.

In two years, its possible the market is lower than today or flat.   We are in an overheated market right now so beware.  At the very least I think there should be a lot more inventory than we have now so it wont be as crazy to find a new place then.   Lets say there was no appreciation whatsover for your $250K house and you sold it for $250K.  Then you net would be $225K and your profit would be only $25K.

If doing this here are my recommendations:

- Buy homes with good bones where future buyers will see it as a quality home.  Stay away from crumbling or leaky foundations unless you plan to fix them as part of your rehab.

- Buy in values less than $260K (twin cities median)

- Devise what will be your plan B if the market takes a correction.   Will you just stay there years longer, turn it into a rental, or sell for no gains?

- Buy a property that would cashflow as a rental if you turned it into a rental.  Use zillow and rentometer to estimate current rents of comparable homes.

Good Luck!