All Forum Posts by: Account Closed

Thanks J Scott.

I hate to ask another elementary question but I want to make sure I have the correct understanding. When you say rental properties are taxed at capital gains, do you mean the actual sale of the property and not the cash flow from rent?

The reason I ask is that I read (without verifying) that a rental company's income is considered passive and therefore not eligible/ideal to be an S Corp. Instead it would be a LLC and the cash flow would be added onto yearly income. However, in a rental company the house is a depreciable asset and it would make sense that any amount over book value received from a sale should be taxed at the capital gains rate.

Thanks for your time and patience.

Please forgive me in advance, I’m just a newbie trying to learn a thing or two and I am not even sure if what I’m asking is feasible and/or legal.

Could you please explain on this a little more? I am currently struggling with trying to determine what an ideal structure of a flipping company is. Does this idea suggest to have a flip company that pays out its profits as wages and also have a separate entity that acts almost as an investment firm that finances the flipping company and is paid back with interest to take advantage of capital gains?

Thanks Mr. Gulley, I figured that would be the overal gist of the answer. Without a standard way to determine the market standard for cost of equity, is it common practice for an RE Investor to determine an arbitrary rate based off a personal assessment of each project's risk and opportunity cost?

P.S. I was hoping you would be one of the ones to see and reply to the question. I have been following you since i joined BP and am impressed with your with your knowledge...I know, I'm brown nosing already :)

I realize this is a complicated question that depends on many variables but I am curious if anyone else has ever made an attempt at it.

I want to calculate the WACC to use in NPV estimates for a rehab and flip business. I realize that ideally the company would use as much financing (debt) as possible which makes determining the WACC much easier. However, trying to be realistic, it is unlikely a newbie will be able to operate with 100% financing and must consider the cost of his/her equity. So my question is, has anyone ever considered how to potentially quantify risk (determine beta) for a flip company?

Thanks in advance for any insights you might have.

Hello BP community!

I have been browsing this website for about a month now and finally ready to take the plunge with my first post. I would like to start off by saying how impressed I am with all of you and would like to thank you for giving novices, like myself, a valuable resource to begin their REI journey.

About me:

My name is Chris Campbell. I am originally from the DFW area and currently live in Oklahoma City. Despite the fact that I have a full time job that I enjoy, I have wanted to work in Real Estate since I was in Jr. High and the grass seems to be getting greener every minute.

I have NO real experience in REI, although I have tried to help my mom from a distance as she explores taking on buy and hold properties in the DFW area. My education background is in business with an emphasis in finance, so main contributions to her are strictly from a numbers standpoint.

Short-term goals:

I am currently working on building multiple business plans for the different types of REI. While I haven't ruled out any specific REI niche, most of my interest is with a rehab/flip business. The results of my analysis will ultimately be the driving factor in determining my future in REI. With all this in mind, I will in all likelihood be posting quite a few questions so please be patient if they come across as extremely novice.

Thank you all for your time and I am so excited to be apart of the BP community.

Respectfully,
Chris