Some experience but first flip questions

[Richard Slade]

so I own a couple long term rental properties but I am working with a partner in my first flip.  Are experienced flippers borrowing money to buy and renovate the properties?  I'm in a situation where I have money or could borrow and I'm struggling to see the benefits of borrowing cash for this process.. Isn't one of the biggest dangers and expenses the potential to not sell in the time frame you planned for and end up paying high interest on borrowed money?  Besides underestimating your repair costs or overestimating your sale price, is this not the biggest danger?  If someone has the cash to do it without borrowing are there any good reasons to borrow?  Especially being new to flips it seems using cash helps give some wiggle room for other mistakes?

[Ryland Taniguchi]

Borrowing works if you price it into the deal. Means you have to get better deals. Borrowing always adds risk but also increases the cash-on-cash return. I've got 12 flips going on here in Seattle and our goal is to do 100 next year. Borrowing from hard money lenders I believe is the way to go and I'll tell you why from my perspective.

I actually have cash but prefer to buy cash flow rentals, tax lien certificates and life insurance with the cash. The problem with flipping is the taxes. You cannot 1031 or claim capital gains on a flip. Without an s-corp election, you have to pay self-employment tax on the flip. If your in a high tax bracket, the flip can put you into an even higher tax bracket.

So I take advantage of being a "real estate professional" tax designation using rental depreciation "active losses" to off-set my "active profits" from flipping. In a nutshell, I prefer to buy cash flow rentals with my cash rather than use it for flips. Just my opinion. Ask your CPA. 

For me, flipping is just a job. Cash flow properties are a better investment with cash.