All Forum Posts by: Doug W.

Try "another 4 months" and you are closer to reality. Don't forget that it will take 3 additional months on top of that to get the City of Alexandria to approve your permit application (assuming they don't kick it back to you for corrections). And then add 1-2 months for site plan work by the site engineers. But you can start the site plan work while in escrow. 

It's your first flip. Stick to the basics: 70% of ARV minus repairs. Don't get cocky and try to fudge that calculation. Pay in cash and close it quick (2-3 weeks). No contingencies.

edit to clarify: 1-2 months for site work. 3 months for permits. 2-4+ months for addition and all work to be complete. 

@Eric Teran

I know your neighborhood well. 22311. I have lived in it and flipped in it. That being said... I doubt your timeline of "a few weeks" works if it involves remodeling the kitchen and baths, other plumbing work, electrical, HVAC, paint, refinishing floors, replacing windows, redoing roof, etc. Plus you still have to add in time to market it and, if it goes under contract, the time in escrow.

You also aren't getting a 500 sqft addition for an additional $50k if you care about quality. 

To answer your question: #1

@Eric Teran

Knowing if it needs $50k or $100k to rehab is a huge question. Let’s assume $50k

$550,000 ARV -$425,000 purchase -$2,125 closing costs (at purchase) -$50,000 rehab -$41,250 closing costs (at sale) = $31,625

Now subtract the holding cost such as insurance (is more expensive than your typical homeowners insurance), utilities, and loan costs.

What if the rehab costs more than $50k?

What if you have to hold the property for 6 months vs 3? Or 9 vs 3?

Hi @Costin I. 

Yes, that is pretty much exactly what I am saying. I don't work 8 hours a day though because I choose to be free to do what I want on most days by way of making smart decisions in real estate investing. I am not a newbie. I've been rehabbing and flipping houses for approximately 5 years and I am also a licensed contractor. 

You can nitpick my words all you want -- the point remains: you aren't going to get rich by driving 1 hour each way to a house on evenings and weekends to do tasks that can largely be outsourced to others. It's about opportunity costs and competitive advantage. If someone wishes to make entry level wages there are easier ways to do so. 

Cheers!

Flips aren't taxed as capital gains. They are taxed as ordinary income. 

I would split the gross profit and you and your partner can then deal individually with your taxes. Chances are that their tax situation and yours will be different. 

Can't she deduct her costs each year via Schedule C? Per the IRS: "Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity."

Here is my advice: don't do anything you could pay someone else $15/hr to do otherwise you yourself will only be getting paid $15/hr. 

Personally.... I prefer to make $1,000/hr by finding more deals. But that's just a personal preference. 

I would open the wall if it is not load bearing. Keep in mind that you will need to deal with fixing the floor(s) where the wall once stood and there is a likely a chance you will have to move some electrical and possibly plumbing or HVAC ductwork.

Opening a load bearing wall is cool, too, but you have to consider the extra costs associated with getting a structural engineer to report on and spec out what is needed for a beam, paying for the beam, and having it installed.

I feel your pain. Been there, done that, still doing it. I won't go into details on a forum such as this though.

I think you that you are correct in that you should assume liability if it can be determined that your work caused the problem. Personally, I like the approach of "I can send Joe Contractor over to take a look and attempt to determine the cause of the leak. If it is something that our work caused then we will address it accordingly."

Be careful though because if you assume liability where you have none that buyer will call you back for every little issue he/she finds with the house going forward. Everything. They will treat their house as if it should have been brand new when they bought it. In one case I couldn't touch the issue (which the homeowner clearly caused himself) and he and his Realtor were PISSED at me. So I simply said "Here are the names and phone numbers of two local plumbers who have outstanding reviews from customers. I am sure that they would be willing to look at the problem and provide you with options on how to fix it".