All Forum Posts by: Linda S.

Wow, @Anthony White. Congrats on your success. I love reading success story from investors from CA. You are a proof that when there is a will, there is a way. Thanks for taking the time to share your wonderful story. Best wishes on your continued success.

Congratulations Justin Fraser for the inspiring success story. You are the proof that with enough passion, enough work, and perseverance, great things can be accomplished. Best wishes on your continued success.

Thanks for the inspiring story. Congrats on your massive success. I have no doubt your story is helping newbies to keep pushing it. Greatly appreciate it.

Eric W.

Thank you for sharing your stories. It's encouraging. Now that you have 1-2 years under your belt, would you please share your experience on what you've done to help you gained experience in the RE field. I am very much at where you were 2 years ago. Appreciate any insight.

@Wayne Brooks. Thanks for your reply. So, it looks like interest/profit earned from private lending in flips will be taxed as ordinary income no matter how the lending is structured.

Hi BP experts,

First of all, thank you so much for all the knowledge you've shared. I've read a lot about "passive" vs "active" income and how "passive income" is taxed as capital gain and "active income" is taxed as ordinary income. I'd appreciate your inputs on how the below situations as different financing options on a flip is taxed .

1) I sign a check for a flip deal. I don't get involve in any other way. I have have a deed, a promissory note, and a Joint Venture Agreement. The agreement is X% interest monthly, and Y% of the net profit [ARV - (Purchase price + Reno + Closing fee)]. The net profit sharing % is specified in the Venture Agreement. Are both of these returns taxed as ordinary income as they involved with an active income of the flip?

2) If I am simply a private lender, with X% interest only, and no Joint Venture on the net profit, how is this taxed?

3) For HML, how is the return/gain taxed?

4) How is the loan returned in HML? If a HML loaned a $100K at 10% for 4 months, how is the return of the interest and principal typically done? An example is appreciated.

Thanks much,

Linda

I am a single mom with 2 part-time young kids. I work in Tech. Currently, we are in a cozy 1br apartment. Rent is 1,350/m or $16.200/yr. We are at the end of our contract, so I am looking for a place for us. I'd like a place where I can put in some upgrades (do some of the work myself) and opportunity for appreciation.

I see this place as having some potentials. (I need to stay around RWC as kids go to school here.)

30 Columbia Ave, Redwood city, ca $550,000, 2Beds, 1Baths, 890 Sq. Ft., $618 / Sq. Ft. Built: 1924 Lot Size: 6,000 Sq. Ft. On Redfin: 1 day Status:Active

I went by to check it out tonight. Exterior needs some upgrade as I see it. I think it's the same for the interior. 80% of houses on the strip are in good shape. It appears to be a good neighborhood. The converted garage is separate, looks to be ~400ft. I read up that the conversion to one's garage does not need permit as long as it's internal, and no expansion. How do I check this?

** If I put in 20% down, borrow $440k (if possible), or 30% down, borrow $385k, the cost of living is ~ 20k. And I believe the converted garage can be rented for at least $700/m * 12 = $8400,so that would bring it right back to ~16-17k (same as my rent). But this would allow me to put in some upgrades and flip in a year or two if the # works out and take on another project or hold for potential appreciation.

Please see my calculation below and let me know pros/cons, what I am missing, ...Should I go for this or something like it?

** I am very handy, don't mind doing hard work and can fix lots of things myself.

Interest $15,265.40

Property Tax $5,700.00

Insurance $1,000.00

Maintenance $500.00

Water, trash, elec $2,100.00

Cost to live (Interest+ Ins+Tax) $23,465.40

Cost to live (after deduction) $20,000.00

** Appreciate everyone who responds.

I read in many posts about the importance of having the right clauses in your contract to allow you to back out or negotiate power when the deal doesn't work out. I'd so grateful if the experienced folks would provide the exact wordings used in your contract that had really helped.

Anna Z.
Welcome to BP!
I am in the same situation. I've been reading here for a few weeks and my advice is to keep learning until we can narrow down a market, feel comfortable and knowledgeable about the market, get a strategy in place, know enough to not get a sour lemon (like one of the previous poster mentioned). As a beginner, it's very tempting to start. What I've found is the more I read, the more I realize I have so much more to learn. No deals is better than bad deals. Keep learning while we wait for the right opportunities.
Cheers.

Thank you all for a great discussion :)