First Flip, Need Advice

[Dante Devine]

Goodmorning Fam,

Ill keep this short. I have a really good friend that needed help with a house she owned in Houston, (she lives in Dallas). Her tenants were moving out and she couldn't afford to pay the mortgage by herself. The house needed about $8k worth of work. I told her I will take care of her mortgage and the repairs if she will agree to sell me the house owner financed. My plan was to lease it out and make a return on my $8k. She is such a good and trusted friend that we did no paperwork (I know, its a bad idea in practice but still no problem there, I also figured I can put a mechanics lien on the property should she try to claim its hers). I have since repaired the property and paid one month of mortgage and found a cash buyer for the home. Now I need to know how to structure the deal. Seems like the best thing to do is a double close with the title company, I close on the house then turn around and sell to the cash buyer. Second option, because I am a broker, I can just act as her broker, and charge a flat fee for however much equity is in the home. My real question is which one will cost more by way of taxes at the end of the year, the money coming to me as a broker fee, or the money coming to me as a fix and flip investor? Thanks in advance for the help.

[Greg Meech]

I'm not sure about taxes as a broker but taxes for a fix and flip are the highest. You have to pay equivalent payroll taxes and other cost. And since your only legally owning the property for less than 1 day hard to claim your expenses I think.

Just take a consignment fee or broker fee and move on. Keep your name off the title and closing has to be cheaper then a double close.

More about taxes in Houston see Michael Plaks website. He has a great article on taxes.