All Forum Posts by: Tony K.

@J Scott Thanks for the quick response. He purchased the property in the Spring of this year.. I asked it had to do with 1031 exchange (sounds like it wouldn't apply) and he said it was because he liked residual income. It did not sound like he purchases a lot of properties every year.

As for tax burden reduction, wouldn't he have to pay for the capital gain taxes anyways when all funds are transferred over; which could be even more (if the house continued to increase in value over the years?)

Is there any benefit of me buying under a seller contract... Would it being under contract that restrict me from selling the house in  say 1 year, if I could payoff the rest of the house then?

I'm looking at conventional financing to purchase a property, around 250,000 where I can pay 10% downpayment and get approved for the total amount. While the house needs small cosmetic upgrades, it sounds like it would pass an inspection through the bank (speculation at this point), given the buy price is below the market price and it's livable. 

I spoke with the FSBO home seller and he said he wants 20% down, and the rest paid off within 10 years. I don't plan to keep the house for 10 years (will likely sell), but sounded like he was interested in a seller financing contract, and spoke of balloon payments within 8 years as well...

But why would a home seller want a 20% down payment, and seller financing if I can get conventional financing for the house and pay his asking price at escrow? It would help me in making 1/2 the size of a downpayment, own the house outright (in case I sell before market drops), and he would receive all the funds all at closing.

When asked why he preferred a seller finance contract, seller mentioned he prefers residual income than at once.

Is there something I'm missing?

After more reading on BP ; particularly Amanda Han's blog post about taxes and flipping ( http://www.biggerpockets.com/renewsblog/2014/07/10...)  ; I understand if the property could qualifies for a 1031 exchange if it's intended purchase is to have it as a long-term rental. 

But for those investors that are repairing houses, are you using ARAM mortgages over 30 year fixed? I imagine many would be. 

I did some research and found that if I hold the property as a rental for some time after rehab (not specified in 1031 exchange); I can then sell and qualify for the 1031 exchange.  (http://www.atlas1031.com/blog/1031-exchange/bid/62...) 

..  but it may make more sense to just flip and pay capital gains taxes as that is what most investors are doing? 

If I keep the property and sell within first year, I would have to pay upwards of 35% capital gains taxes. If I sell the house in the second year, there's long-term taxes 15%. Hm expensive.

After more reading; it sounds like if I live in the property for 2 years or 760 days; I can possibly sell and do the 1031 exchange. Repairs can also be deducted from the capital gains taxes if property recorded, and avoid self employment tax assessments (as an investor)

@J ScottHey Scott! Thanks for answering questions about 1031 exchange not being allowed for flip properties.  So I should expect to pay the capital gains taxes on the house after it is sold? (First flip) Is there a way to avoid that by structuring the deal in a llc that would have tax benefits?

I am not planning to live in the property during repairs. and the rehab should take 6 months or less (Was just planning to use 5/1 or 3/1 Adjustable rate mortgage so definitely plan to sell it before interest rates may change was what I meant)

Again not living in property, I wasn't planning to use HUD or FHA programs as I wanted to flip the house asap and not have any live-in criteria. ARAMs are not federally insured loans I thought?

Thanks,

Tony

I'm currently looking into 3/1 ARM loans (2.65% interest from local credit untion) to purchase and sell some fix and flip houses, rather than a a conventional 30 year fixed loan (3.9% apr) to save on interest rates. Since I plan on flipping the house within a year or two, it seems I would benefit more in savings from the lower interest rates offered through ARMs.

I was curious how many investors here use ARM loans for their fix and flip projects? How was that worked out for you? ARMS aren't that risky if property managed, right?

Once I sell the house; I can pay off the loan in it's entirety and reapply for a new ARM loan for my next project. Does this sound like it would work? I can still do the 1031-exchange if I payoff the loan and get another loan to buy more investment properties?

Thanks

I'm currently looking into 3/1 ARM loans (2.65% interest from local credit untion) to purchase and sell some fix and flip houses, rather than a a conventional 30 year fixed loan (3.9% apr) to save on interest rates. Since I plan on flipping the house within a year or two, it seems I would benefit more in savings from the lower interest rates offered through ARMs.

I was curious how many investors here use ARM loans for their fix and flip projects? How was that worked out for you? ARMS aren't that risky if property managed, right?

Once I sell the house; I can pay off the loan in it's entirety and reapply for a new ARM loan for my next project. Does this sound like it would work? I can still do the 1031-exchange if I payoff the loan and get another loan to buy more investment properties?

Thanks

Originally posted by @Troy Cole:

Turn-key are properties that need no rehab and ready for tenants to move in. Wholesale properties need rehab (generally) before it can be rented/sold. 

Recap of thread so far:

0 Deals: 1 person

1-5 deals: 5 people

6-14 deals: 1 person

15-20 deals: 1 person

35-40 deals: 3 people (at least 2 that incorporate turnkey)

@Jerry W. Well played Jerry. When you see those deals well below market rate, gotta get them under contract! It's always a good deal when everyone wins.

I also think people doing over 30 deals a year has 1) assistance 2) sending out a ton o mailers and/or door knocking.  Anyone from this group utilize  door knocking techniques?