All Forum Posts by: William Harvey

@Jose Mora There really isn't any way around the tax piece. Whatever your net profit is going to be taxed as short term gains, which I believe is the same as ordinary income....or at least it is close to ordinary income. One thing I do from the income generated from house flipping, is passively invest in multifamily and mobile-home park deals. With those kinds of deals that have heavy year 1 bonus depreciation, the "losses" I incur from the K-1's goes directly against my earned income from the house flipping. The reason why is because I am considered a full-time real estate professional in the eyes of the IRS. So, even though the house flipping isn't super tax-efficient, by investing in tax-efficient things like multifamily, you can drastically reduce the net amount you'll pay in taxes. Just make sure to talk to your CPA and that you will pass the sniff test to be considered a full time real estate professional. Hope this helps!

This sounds like a good plan on paper but I think it has a chance of getting majorly derailed if you run into some additional problems while completing each unit incrementally. Why don't you find an equity partner and come up with all the cash up front so that you have ample reserves to ensure that if you hit a snag that you are able to keep the project going? Versus running out of money and stalling out. 

I would create a LLC. I'm not an attorney and this certainly isn't legal advice, but if not for anything else, it is much "cleaner" to have a separate entity and bank account that you are doing business from.

It isn't complicated to pay yourself at all. I'd look into whether it makes sense to treat it as a partnership or S-corp for tax purposes and you'll get clarity on this. By default, I believe all LLC's are initially classified as partnerships, but you can elect to be classified as an S-corp by sending in a form to the IRS.

Also, if you have a separate bank account for the entity, this makes tracking income/expenses much easier too since it isn't blended with your personal account. I'd talk to a competent CPA and they can help you here with how to be treated for tax purposes. Hope this helps! 

@Tanya Torres I would recommend you look into passive investing as a strategy. I started doing what most people do and buying active rental properties and came to the conclusion that I hated dealing with tenant/guest headaches and would much rather delegate all that to someone else. Also, I would personally rather invest in a 100-unit multifamily property than a 1-unit rental property. Even though I own a small fraction of the 100-unit property, the risk is spread out and not having to manage it myself is a beautiful thing. This certainly isn't as "sexy" as owning a bunch of properties on your own that you have full control over, but I can tell you after doing around 10 of these deals and having a few go full cycle, it is definitely sexy to make money passively without having to do anything. 

Just food for thought! I really wish someone had told me this prior to me buying multiple houses. 

 To piggyback off this, we use Parth with Lead Plug for PPC. He is fantastic. We burned through multiple guys before finding him and have been working with him for about a year and a half and it has been great. If you're serious about getting going with PPC I would talk to him!

I would look at Propstream, their comp tool is pretty great. This is just one feature they have, we have used them for years and love it. 

I don't see why they would care. As long as they get their principal + points/interest back then it shouldn't matter if it is from a sale or refi. Usually the issue comes into play when you do the opposite of this and get a long-term (permanent) loan and then end up selling or refinancing shortly after the loan was originated. A lot of commercial/bank loans come with prepayment penalties to prevent this from happening, but you shouldn't have that with your hard money loan. 

 I completely agree with @Andrew Weiler here. I will add that your first flip, or even multiple flips, will be how you really build your team. You'll realize which contractors/subs can be relied on, and which ones cannot. Myself and @Dan White flipped 2-3 houses before we established our core group of guys that we now use (almost) exclusively on every deal. And there were a bunch of others that we realized were not reliable and we no longer call on them. 

I'll also add that you should really focus on having your first deal be a great buy to account for mistakes and lessons to be learned along the way. The first flip we did ended up netting about $47k but if we did the same flip today it would likely end up somewhere around $60-65k in profit. We overimproved it, and had some contractor budgets get out of control but because we bought it so well, none of these mistakes really had any serious impact. Hope this helps!

 I agree with @Andy Sabisch about making money when you buy. That holds true in literally any market, good or bad. When we are running our numbers and analyzing deals, we are being ultra-conservative on the ARV. Since there is uncertainty with the Fed raising rates, elections coming up, inflation, etc. we are baking in a big buffer on the ARV. If recent comps support a property selling for $400,000 we would likely knock that down to $350,000 and work backwards from there.

Obviously this market sucks and is changing, but honestly, this is the first time in years where we've felt we have the upper hand as buyers. We buy everything off market directly from sellers and we've always felt fomo and were nervous about our offers. Today, we have zero fomo whatsoever. We are fine buying deals at our number, and if that doesn't work then best of luck. Seems like a lotttttt of buyers have dropped off so the ones remaining can truly get good deals.

Tl;dr - focus on NAILING your ARV and being on the conservative side, and you should be good no matter what kind of market you are in.
 
 

I am pretty sure that FlipperForce would do what you are looking for