All Forum Posts by: Dylan Willbanks

You can't 1031 exchange a flip. 

You will pay taxes on the profit at ordinary income tax rates. 

 I would first suggest a 1031 exchange to where you pay no capital gains taxes as you buy into your next property.  This takes forethought and planning that you can search the forums about.

I think you will find your potential seller financing path challenging - not for what it is, but for trying to find those properties that will fit your timing, as well your scenario - whether it being the right size, condition, location, the right terms, etc. 

Another thing possibly worth considering is actually keeping the flip as a rental, and then borrowing against its value. This is essentially giving you some of the cash from your improvement (presuming they are significant) , as well as a steady stream of income into the future - which helps you long term in numerous ways.  Passive  income is fairly consistent - especially to the bank.  So by having income you can show is consistent, it helps you qualify and look more attractive to lenders down the line.  Flips are more ‘unknown and one off income events.”  The bank wants to know how you will pay back  your loan.  Saying “I’ll try to repeat the same process and flip another house is a risky proposition to a bank and having no fixed income stream doesn’t help.  A thousand things can derail a flip - changing market, underestimate expenses or overestimating income, mistakes, errors, contractor issues, permitting issues, just to name a few. 

But if you keep the house and rent it you get some cash by refinancing it, the bank sees a secure asset paying the loan, and you get an income stream as well towards your living expenses. 

Hope it helps!

Randy