All Forum Posts by: Michael Bieler

@Eric Lopez

Happy to provide resources for Columbus/Cleveland OH that my clients have had success with

I'm a realtor who lives & works here in Pompano Beach. Sadly I see properties misrepresented a lot, just like this. There's actually a property that is currently for sale in the Old Pompano neighborhood, that just came to market that is being sold as a Duplex, but all county tax records show it to be a SFH.

It will be hard to prove that the previous owner knew there were violations. It's worth speaking with a lawyer. Then decide if this is worth pursuing.

It is up to the Buyer & the Buyer's Agent to do their due diligence on the property, and not take anything at the owner's word. There's honestly a chance that the owner had added the efficiency years ago, and just assumed that automatically made it a duplex. Or this could have been done with owner before that one.

In S. FL you have to double check all sorts of stuff. A lot of stuff was allowed to skate by in the 70s/80s since the cities didn't keep great permit records. I've seen & hear about stuff coming into the light of day all the time that completely messes with the closing of properties here.

@Michael Bieler, Break even still gives you amortization paid by the tenant, depreciation and appreciation + the 30-40% tax savings on the profit.  It's just a very "meh" feeling to not see cash in the bank each month isn't it.

@Michael Bieler, Yep the tax even on one flip is a killer!  You'll have to run a comparison between the cost of carry (PM) vs the tax you'll pay.  But you could also get a renter in there and do a refi.  The additional rent income might help with your income needed for loan qualifying.  

If you can make the hold numbers work then a "slow flip" (although I discourage folks from ever using the "F") word, would be your ticket.  

Put a renter in, refinance the property to get your next acquisition, and wait for a year to do a 1031 on this one.  During that time you're making income. from cash flow, amortization of the loan, depreciation benefit, and appreciation.  And you're busy with your next acquisition anyway because you did the refi.  Once you get this daisy chain going you'll be busy as a beaver making tax deferred income the rest of your life.

On the gross profit. So 40% of the 45k.  So 18k tax and net profit for you of 27k.

Now as a stand alone its ok.  27k is 27k but if you can scale that to 10x/yr then that's 270k, that's quit your job money.  That's what I try to do for my guys. Set them up in good markets with a solid network that can turnover projects in 90 days close to close on flips.  I create an environment where they can step in and do 6 - 8 no problem.  On the last deal the client exited with 75k gross.  He's taking the tax hit and walking with 45k.  Financing closed late July on his purchase and he's closing Oct 10th on the sale.  He's already in another deal with the same kind of numbers, loan closes in two weeks.  He'll net 40k - 60k there again in 90 days.

Taxes on short term gains in RE is usually 40%.  If you hold it for one year, I think it drops to 25%, and if you live in it for two years then sell it I think it drops even further.

But if you intend to just do quick flips and truck along then they will tax you 40% on your gross profit from the sale.

For my clients, they bite the bullet because we make it up in volume.  I try to get my guys in and out of flips in 3 months and sometimes guys do two at a time.  So if you do 10 in a year and net 30k after taxes on avg then your netting 300k. 5 in a year and net 150k.  It's a good way to raise capital for your investments plus gain that experience lenders like.  If you are doing a one off flip then yes, try and pay the least you can, but if you are looking to do 8 - 10 in a year I'd say just bite the bullet and pay the short term gain taxes and make it up in the volume.