All Forum Posts by: Dale Line

Thanks Dave. Good stuff! If I'm able to do a 1031 immediately at the closing of the sale, that would be the best of all worlds. Is the theory that because I own a 50% stake in a property as a silent partner (other than paying some bills), the property is considered an investment for me? 

As part of an inheritance, I am a 50% owner of a lake home in Minnesota. At some point in the near future, the other owner (who uses the property full time) is going to want to sell. My plan has always been to use my proceeds to buy an investment property once the time comes to sell. The property is worth about $300,000. Because of the inheritance, when I sell, I will owe a chunk of my $150,000 proceeds to the IRS. 

It dawned on me this morning that this may be a good candidate for a 1031 (which I've done on a previous transaction). My thought is I could buy out the other owner and then hold the property for a couple of years and convert it into an investment (as a seasonal vacation rental - which there's a decent market for in the area). Note - the other owner is not interested in holding an investment property. Then after a few years as 100% owner of the investment property, I sell as a 1031 exchange to and trade from this property to a property in my target market (southern CA). 

Let me know your thoughts/things I should consider. Thanks, Dale

I answered one of their ads to get some background information on their loans for fix/flips and buy/hold, which they offer both. Anyone had experience/insight?

I would like some insight into calculating returns on real estate projects. I started investing several years ago in condos that rent out with a positive cash flow. I bought units that support higher prices post rehab because of what other upgraded units trade for in the building. I remember David Bach saying the beauty of real estate is the high ROIs because you generally put less down than if you were buying other investments, such as a stock. I've run general numbers on one of my units, and the potential ROI seems decent - - am I doing this right?

First the ROI calculation I'm using is:
ROI=((payback-investment)/investment) x 100

Here's the basics on the purchase of the condo
$300,000 purchase price
$15,000 down payment (closing costs picked up by seller)

Simple ROI Calculation #1 based on original investment
$400,000 sale price (based on upgraded comps)
- $20,000 commission
- $35,000 rehab/carrying costs during rehab
- $300,000 original price
= $45,000 profit payback

so, ROI = ((45,000 - 15,000)/15,000) x 100 = 200% return.

Or is it better to calculate based on all money I've put it:

$400,000
- $20,000 closing costs
- $300,000 original price
= $80,000 payback

$50,000 investment for down payment, rehab, carrying costs

ROI = ((80,000 - 50,000)/50,000) * 100 = 60%

Am I on track? (I've excluded taxes for 1031 reasons). I also know the condo market is sluggish, and this isn't something I plan on doing until that market gets some traction again. Thoughts?

You guys have been great. Thanks for the advice! Dale

Thanks Richard! That makes sense. Folks seem to be focused on either rentals or flipping - - so I was wondering if there is something I'm not considering by combining the strategies, such as a more negative tax situation. About how long on average do you hold the rental prior to flipping it?

I've been considering a strategy of buying properties that I can rent out (with minor rehabbing), continue improving the property while it is a rental (taking advantage of the business expense tax deductions) and then in the future do a flip quality renovation and sell the improved property. What are some things I need to think about when exploring this strategy?