All Forum Posts by: Jonathan C.

Just stumbled across this kinda dated thread and reading thru all 4 pages, some seems to be still optimistic but some are complaining about lack of investment opportunities. 

But what are the market/acceptable cap rate for SFH and MF in Phoenix and surrounding areas? Anybody care to share?

Didn't want to start another thread with the same topic, so reviving this one - 

Any wholesalers in Las Vegas? Looking to buy SFR in the lower price range, preferably south of Sahara and west of Decatur all the way to the far Southwest.

Thanks all for the great tips and suggestions!

@Rafael Norat

To be honest, my future goal (and I guess any RE investors too) is maximum return and financial independence, a good balance of both cash flow and equity. While I understand it helps to have a set goal, the reason I'm asking in general without a set goal is because I'm trying to see what creative ways are out there to generate maximum return. 

I could safely set a goal of $3k net cash flow in 3-5 years but why set a limit if there are ways to bring in 5k or 10k? I'm sure there are experienced investors here in BP that have personally done better with maybe less amount than what I have to invest, so it will be helpful for others to learn from these great tips/experience.

@Colin Smith

Getting a job in a RE related field and/or become licensed is definitely part of my plan :)

@Laurie Johnson

Not really looking at wholesaling because as I learn more, it seems to be hard for a newbie to find a really good deal with profit to wholesale to another seasoned investor. Just my personal view though, I could be wrong. 

Becoming private lender sounds like a good idea, will look into that and keep options open.

@Richard Dunlop

@Mark Elliott

@Andrew Martel

As I look at the property median price map for the country, I'm really seriously thinking of moving to the East because it seems like there are more options available with lower starting price. The problem I have is I grew up in a tropical country, even after 10 years in California & Vegas, I have not lived through any winter/snow. And I'm sure the winter weather plays a big part be it rental property or flip projects. Any of you mind to share in detail what do I have to look out for/worry about in regards to winter weather?

Getting a job/income and building credit is definitely the priority but as for the 40k to invest in, here's roughly what I have in mind, please correct me/suggest if it is workable - 

*Disclaimer :)  I do have source of income for all expenses, just not verifiable for loan application, so the $40k I mentioned is budgeted solely for RE investment, no worries about daily expenses. PLUS I could get "in-law" loan of 20k-30k @ 0% for short term use if needed but I really don't want to unless forced to)

Plan A, the flip & hold hybrid:

Move to the East and find low price market in the 30k-40k range and start flipping 1 property at a time (all own cash + "in-law" loan if needed), hopefully I could do 3-5 in the first year with 10-15k profit each. Save the profit gathered to buy a duplex/triplex/fourplex (all-cash) in the low price market to start building cash flow. 

With the remaining/initial cash, continue flipping in the low end market for another year or two and by end of year 2, hopefully credit (and verifiable income) is in place and then move on to more conventional way of leveraging with loan. 

Concerns:

1) How sellable are the low price properties in the flip market?

2) How difficult is it to work on a flip project in the winter?

Plan B, buy & hold only:

Move to the East and get a fourplex in the 60-80k range (pay cash, with "in-law" loan) and use monthly cash flow to pay off "in-law" loan first, when loan paid off in 12-18 months, save up the monthly cash flow for next acquisition. And by year 2 or 3, with 1 paid off fourplex & credit in place, acquire next fourplex and start leveraging with loan for acquisition. 

Concerns:

1) Responsibility/additional cost/liability of a being a landlord with winter weather in play?

@J Scott

Thanks!  

@Brandon Hall

Thanks a lot!! Great explanation. That makes sense and clears all the wrong assumption/understanding I had before.

@Tom Keith

Thanks, so each flip/property is taxed just like a "sales tax" on a product when it is sold?

If that is the case, then that makes my question irrelevant because I always thought a "business entity" is taxed based on its profit/loss for the year, I didn't know that for RE, "sales tax/capital gain tax" has to be fulfilled before the profit/loss. 

Thanks for all the reply, I know the best way to get the best answer is to ask a CPA but the one I talked to have no answer for me - she only told me "depends on the just situation".

To clarify a few things to make my point/question clear. 

1) This is all done by a Corporation - NOT as a person/individual. So if a trading company can prepare taxes for "profit" based on total of what they sell vs. cost (what they paid for the goods), can we apply the same for a R.E. Investing company??? 

For example, the company received $1MM from selling off their inventory but spent that same $1MM to purchase other properties, there really isn't any profit on the books for that particular financial year. No dividends to pay out either because there is no "profit materialized" if you view it from the business/accounting point of view for that financial year. 

@J Scott

 Do you mean we pay tax for every particular property when it is sold? 

2) I know 1031 Exc is not for flip properties. What I mean is that IF at some point in the future, there are no more flips, the company start to hold on to the properties and not selling off any of them, so when held longer than 1year, the capital gain tax then comes to play. 

Can a company use 1031 or they're just for individuals?

Hi All,

Newbie finally getting ready to pull the trigger, I have 40k cash to start out with BUT NO CREDIT + no income, meaning unable to get any conventional/bank loan. Need advice on where/how to start my RE journey.  

*"Where" because I am ready to move to any market in the country that could make it work for me. Where I'm at now in Las Vegas & Southern Cali, 40k seems to be hard/impossible to do any deal in RE without getting any loan - something not possible at this moment. 

** Can get licensed as a RE Salesperson/Agent anytime - completed course & test, just not licensed with any brokerage yet, could easily get licensed in any state if moving out out NV or CA.

*** Handy and can DIY small flip projects, demo, flooring, kitchen/bath remodel, paint, walls, ceiling etc.

Hopefully can get some tips from all the experienced investors here. Any advice/comments welcomed :)

Hi All,

I have read a lot of posts & books and even attended "Guru" seminars that all seems to make the same statement that a Flipper pays his/her profit as active income - in tax bracket of 30%(?) vs. 15% capital gain tax if one holds the property 1year+. 

I have not spoken to any CPA but my question is, IF all the the flips are done in an entity - say an S-Corp, and if I use the profit from my flip to purchase the next properties, there really isn't any profit at the end of the year because all the money gets invested into acquiring the next property(ies) until the day I stop flipping, is that correct? Or should I say is that acceptable by the IRS? 

The business of the company is buying, fixing and selling real estate, and capital is used to conduct business (buying & fixing), I am just growing my business, not really enjoying any income (except for the "fair market salary" for the S-Corp owner). 

Example, 500k put into a flip project, sold for 700k, profit 200k. Then immediately use 500k+200k(profit) to purchase 2x 350k properties for next flip, then sell and buy another couple higher priced properties. And then keep rolling year after year. 

Of course even if re-investing is acceptable, there will be a BIG tax bill at the end of the road, so now comes the second question, is it possible that at the end of the flips the company purchase commercial/multi unit and hold on or keep doing 1031 exchange. So there is really no active/profit income all along the way, just building wealth/equity, anybody knows what does Uncle Sam says about this?

@Jeff S. thanks!

But I think the situation I have here is a bit different from the normal lending situation. What we are trying to achieve here is for him to take possession of the property in event of a default with the least hassle. Nobody hope for a default situation but just as an assurance for my investor, we want to have it setup in such a way that IF and WHEN a default occurs, I willingly release and transfer the property to him without even any foreclosure, he can just go straight to the title company and take full ownership.  Is it possible to have such type of arrangement?