Doing multiple rehabs with revolving debt

[Malik Welch]

Hey BP I have a  scenario question for any rehabbers or Accountants.

If I have a private lender lend me 100,000 for a year at 12% APR for me to use the money as many times as I'd like through out the 12 month period doing deals. Let's say I'm able to complete 5 flips.

To keep it simple let's assume I buy for 30k put 30k into it and sell for 100k on all 5 flips. 

After 10% selling cost I have 90k on each.

The end of the year I give him 112k back and I have 450,000 

(90 X the 5 flips)

Will I be taxed as if I made 450k or the 30k gain on each flip. ? 

[J Scott]

Exactly what Ed said above.  From an accounting standpoint, you have $500K in revenue, $350K in cost of goods sold (COGS), resulting in $150K of gross profit.  The $12K interest expense is considered part of SG&A (sales, general and administrative) expenses.  You may have other expenses there as well -- umbrella insurance, tools, office supplies, home office expense, accounting/legal fees, etc.  Ultimately, you have $150K in gross profits minus your $12K in interest expenses minus any other SG&A, which results in your net profit number -- this is what's taxable (likely at your marginal rate plus self-employment taxes).