Low-cost cash flips

[Eric P.]

I'm considering pursuing flipping. I have about $50-75k in cash I can dedicate to this, and I'd like to fund the entire operation in cash (purchase and rehab). This is impossible where I live in nyc, so I'm wondering where is a better place to do this with $50-75k in cash.

Fyi, I already have experience with out of state buy and hold (including out of state rehabs on these houses). It took me 6 months to build my team the last time around, so I am very patient and willing to spend many months building up a team if I can find the right place to flip in cash using $50-75k in cash.

[Dave Foster]

@Eric P., Oof is right!  Flips do not qualify for 1031 because your intent when you buy the property is primarily to resell.  If your intent is primarily to hold for productive use then you can use the 1031.  It's not as simple as a fixed holding period.  There is no statutory holding period.  Certainly the longer the better.  Most conservative folks would say more than a year but there can always be circumstances where less may be acceptable or more required.

You're absolutely right about the enormous tax bill generated by ordinary income coupled with self-employment tax, and HCA surcharge.  The answer is to change your model slightly from a fix n flip model to a fix n rent n evaluate model.  Now  you lessen your tax burden whether or not you 1031. You potentially completely mitigate taxes altogether using the 1031.  And you generate the significant tax deductions and cash flow that allow you to ratchet your investing almost as quickly as the work intensive flip model.  Let the tenants pay the bills for a while.