All Forum Posts by: Ryan Lucht

Hi all, 

4 people (Myself, my girlfriend, girlfriend's sister and her boyfriend) just completed a flip that will go up for sale this week. Do you have any guidance on how taxes would work in this situation?

My girlfriend and her sister's boyfriend's name are on the property. The property was owned for less than a year. I own a rental property with someone un-related to to this group (not our primary income earner). This is our first and only flip (fell in our lap type of thing). We all file taxes individually. If we sell around asking it will be around 25-28k per couple after expenses/fees/realtor/etc, without taxes though obviously.

1.) Could we cleanly split the profits 4 ways or would we have to do half to my GF and half to the boyfriend and have them deal with the taxes?

2.) Could we get around being classified as a dealer since it was a one time flip and we all have normal 9-5 jobs?

3.) If I can convince my GF, is it possible for her to roll over our portion of the profit as an "investment" into another property my business partner and I will buy with a 1031?

4.) Any other general guidance?

Thanks!

Ryan

Death in the family. No children so the house went to the sister who just moved to Arizona and wants no part of the sale process. Doesn't want a realtor or to list or do anything. She offered it to me because she knows I have expressed interest in it and might be willing to buy it as is. I'm sure she could get a lot more but she simply doesn't want to deal with anything. 

80% confident? haha. I looked at comparable properties in the area and they are going around 160-185 range. I will hopefully be able to get inside and take a look tomorrow. I did drive by it on my way home from work. Exterior needs some minor landscaping work. Furnace, water heater, roof were all replaced within the past 5 years. My main concern would be that basement especially if the two things mentioned that needed fixing were both common fixes for water in a basement. 

Hi Mark,

I should clarify that i'm not dragging her into it. She definitely wants in, we were just trying to figure out how to do it that saves the most money. A lot of stuff I planned on doing myself (I have done quite a few projects at my home and help a buddy out who has a rental who lives out of state). I do plan on hiring some people though for things like the grading of lawn. She/we can definitely float the second mortgage and all associated costs. We live cheaply right now.

That fancy 1031 exchange you mentioned got me thinking too. We are planning on moving our primary residence within the next 2 years. Definitely something to think about. Thanks!

Hello, 

My name is Ryan and I live in the Milwaukee, WI area. Been lurking around here and listening to podcasts quite a bit without ever really jumping on anything. With a recent death in my girlfriend's family, I want to make my first move (flip). 

First some basic info. 

• I own a primary residence with about 35k in equity (around 23%)
• My longtime girlfriend (essentially married without caring about marriage) has never owned a property and currently lives with me.
• Property would be sold to me for 115k
• Estimated value between 150-175k
• Do not have a ton of cash on hand. I could pull from equity and some investments but would like to keep the upfront cost as low as possible
• I have not personally seen the property yet but have been told by someone I trust (and has rental units) that it is in good shape. Needs exterior grading and sump pump for sure (makes me think possible water damage in the basement)
• Both my girlfriend and I have 800+ credit scores
• I need to decide on this very quickly

My questions are all basically money related

• I would say this would be a one and done flip for now. We plan to do more in the future but want to see how this goes. I do not know if we would try to defer taxes. 
• Would it make sense for my GF to sign a traditional mortgage for this with 3-5% down? 
• I am assuming (dangerous i know) that it would appraise for more than 115 as it lays today, the family just wants to be rid of it with as little fuss as possible. 
• How do taxes work? From what I have read it sounds like it will be taxed just like my salary as an active income if we sell within a year, plus a self-employment tax. So like 23% + around 13% for the self employment. Is that more or less correct?

I really would like to act on this at it seems like it could work on and would be an easy way into the life but the money part is stressing me out. We could carry a second mortgage on the house if we need to for the few months it will take to flip, I just want to be sure to go about this is the most profitable way. 

Thanks all!

Ryan