All Forum Posts by: Micah Shelton

@matt Santos nice to see you on here too. I'd love to pick your brain some time. 

As for Julie's question , yes the FF career does allow for some swinging hammer time. We work 24 hour shifts and then have two days off. With careful scheduling and forethought fixing homes up can for right in. 

Thanks...Ill take any help I can get!

Looking at just the purchase price money the HML cost me a total of $9560. The private money was at the $12800 so there was a few thousand between the two. I ended up having to borrow more on the HML due to tying up that 20% down. In my mind Im in agreement that the private lender makes more sense. Less stress, less tied up funds.

Hello!

2015 was a busy year for me in the realm of flipping homes. I found a contractor that wanted to flip houses but didn't want to fund the entire thing so I said, "let me see what I can do." One month later I had secured a business arrangement with a private money lender and had an accepted offer on our first project. I'm learning and adjusting as I go.  We did 2 full flx and flips in 2015 and just sold the 3rd at the beginning of this year. Im always looking for ways to tweak our process and make sure we are doing things the best way possible.

@brent coombs, @Steven Pickler, @Ken Vesely. Thanks for the quick response.

I agree with Ken that the Hard money is cheaper but reduced stress is nice. In addition I only saved about 2k after fees and payments. 

I changed routes the second home due to the investor only being comfortable with one project at a time and they ended up overlapping. He wanted to get one done and then work on the next. I just bought a bank owned project and am going to use him again. This was because I have my 32k tied up in the hard money loan and that wont close until 10th of Feb. At some point (soon I hope) I will be able to overlap projects and use the same lender.

How much of the profit do you set aside for potential taxes? $40%?

So I have flipped three homes now and I'm trying to get my money costs down, or at least be doing what makes the most sense. Which of these two loans that I have done makes more sense to continue with:

1. I have a private money lender (who is a friend) He funds the purchase price at a flat no payment till sale of home rate of 8%. He buys the home, puts it in his name and I do the renovation side of things. I fund the reno, structure and deal with the sale and then bill him at the end for the profit minus the 8%.

Our first project was bought for 160k and I paid him a total of $12,800. I paid for the renovation $20k and we sold the home for $250. After all fees associated with the sale I billed him $59k leaving my "profit" or income at $39k.

2.  The second home I did I used a hard money lender. This home too was purchased at $160k. I had to put down $32k and pay $7k in fees for the loan. I financed $128k.  The reno cost me $50k and took 4 months to complete and close the sale. I had a 12% apr ($1280 payment each month, but the first two months were tied into the $7k up front fees). Due to the larger down,  I borrowed some for the reno and accrued $5600 in money costs. So total I paid out $15160 in lender fees. This home we sold for $290k and Im slated to make $39k after all sale expenses and reno expenses deducted.

The private money seems to cost me a bit more but the stress of not paying a monthly fee is nice. Id like to get thoughts as to if you think one or both of these are good/bad or?

Also, is there any tax differences between the two. The first looks like true general income. The second was in my name and could IRS out as a flip project.

thanks for helping a new guy trying to work through this new endeavor...