All Forum Posts by: Lydia Woods

You pay taxes on your proportionate share of net profit as you agreed upon per any operating agreement as mentioned.  You basically have a partnership and might want to consult a good business and tax planning professional and attorney to avoid having to possibly pay more in taxes than is necessary.  With fix and flips that are successful you have several opportunities depending on the facts and circumstances. 

Your profit and losses will be divided per your operating agreement and can be 50/50%. The loan will not impact much unless you have some basis limitation issues. 

@Lydia Woods, I know people who tried this before in Detroit, they all end up selling at a loss a few years later for 3 reasons. 
1. The city doesn't want those eyesores anymore, so they will bury you under blight tickets. You could declare it has vacant but you will be required to secure all windows and doors, install floodlights and maintain the landscaping on a regular basis.

2. The holding cost, even though it's vacant it's still costing you money every month, you have to keep it clean (#1), pay the property tax, insurance (pretty big risk it gets burned down), even if you make X3 in 20 years by then you'll probably have spent the same amount in holding cost. 

3. It's a pretty big city, Built for 2M people and now down to 637k some neighborhoods are coming back, some never will. $3000 to $10000 houses are probably in the part that never will, but maybe it will it's a gamble. 

I personally look for solid/steady cash flow instead of gambling on appreciation so my advice would be to look into a better neighborhood and buy a stabilized asset. 

Good luck,