All Forum Posts by: Dallas Trufyn

@David Benton 

"I was talking with a rehabber last week that bought a home for $125k and has put $120k in rehab so far with a value of $320k. They are already at 80% when complete, probably another $10k to complete. I would not have touched this as the numbers never made sense. This was a major rehab which should have been purchased at 55% to 60% ARV. If she had bought at 60% even if she calculated rahab at $100k she would have only paid $92k and she would still be ok on the profit side."

Most flippers have a hard time getting properties at 70%, let alone 60%. From these rough numbers listed, this looks like an 80% deal, which will only net her a 10% profit (so, 10% of $320k should give $32K profit). Not the best, but not the worst deal. 

It seems like from what you are suggesting, is that the percentage to purchase should change depending on whether it is a major rehab or a cosmetic, correct? I have personally done flips from 'lipstick on a pig' to tear the roof off and add a second floor. The 70% (or 75%, or 60%) purchase rule doesn't change for either situation. As long as those two Most important numbers are correct (ARV and Reno), you will get to the Max Offer number. Just curious why you state that?

Instead of framing it in a Mentor/Student situation, I would suggest a JV.

I paid a 'guru' for my RE training and have absolutely no regrets in doing so. Quit my job at an Engineering firm, been doing REI full time for two years now. Being a discreet business person, I understand you do not 'give away the farm' for free, you need to make your own money with the knowledge, but I have partnered with some different parties for the purpose of 'sharing' the knowledge and resources and started flipping houses. There are people out there with great knowledge/experience/companies and/or money who don't want to buy a five-figure course to accelerate the process, and they want to get into this "Real Investing Thing", but they do not possess the formulas/tips/contacts and or the confidence to dive right in. Networking and/or partnering could give you the missing pieces of the puzzle. Don't kid yourself, there are many people in a 'team' that make a flip or a hold happen. Robert Herjavec explained it perfectly on Shark Tank once;

"In business, you have to get really good at knowing what you're not good at."

It's only worth about 2 cents, but just a suggestion...

You did less than 10% (6.5%), but hey, you made more money than you had before you bought the house! Good job.

You are absolutely correct about the contractors. In the process of taking a contractor to court for ripping us off 5-figures by not finishing a job. It happens. Also had to get rid of some horrible painters on a reno, and hire another one to 'fix' the job, but he did just that for us. Heard a great saying awhile ago;

"If you think hiring a professional is expensive, wait till you don't hire one." Absolutely true. 

I would have to see the comps to answer that question. Not sure what formula(s) you are using, but the MOST important number in a house flip is the ARV. That is the number you would work backwards to get your Max Offer and and of course all the in-between numbers (reno, holding costs, RE fees, etc) have to line up too, but the selling price (ARV) is where you make the money.

Numbers seem correct, although $580 for a two bed seems high, double check and then triple check the comps. 

Looking to head to the Sarasota area in May to fix and flip some properties. Looking for wholesalers/agents/contractors etc. Feel free to contact me and let's discuss how we can help each other's businesses. 

You are correct, but my Corps are/were not passive, so I have not come across that scenario. Thanks for bringing up the numbers. If someone were to hold a property in their personal name, then yes, they will get taxed at that person's tax rate. That number could be high or low, but for the most part is usually higher than 17%, as most working Canadians are taxed higher than that in my experiences. 

Looks like a 'by the book' flip deal, you did good. Too bad with the holding costs, but it happens. Keep it up now!

The term 'company' is used for both Corporations and Partnerships/Proprietorships. A person who is a plumber/electrician/dog groomer etc. can set up their company either way. 

I am not an accountant at all, but from what my accounting firm has explained to me about Corporations has nothing to do with passive or active income. Walmart, Esso, Loblaws are all Corps and mainly earn active income. The difference are the Tax rates. Generally 10-15% for corps, whereas a Partnership/Sole Proprietary type of company gets taxed similar to an individual, generally 25-40%. We have had 4 Partnerships and 2 Corporations. Corps are always less. 

In Canada we don't have LLC's, that's a US term. You can set up a Company (Sole Proprietor or Partnership), or you could go Corporation (Inc, Ltd. Corp.). Pros and cons to both, talk to your accountant. I went with a Corporation for my RE as I have had other businesses before in Corps and there are really good tax advantages, but the cost of setup and accounting fees are much more than a Company. The taxes for a Company will be much higher. Your accountant may have a preference too.