All Forum Posts by: William Harvey

@Russell Brazil do you use QB for your house flips? 

I don't think that is correct about expensing. Google "house flip capitalize or expense" and see what comes up. I've also talked to multiple CPA's on this topic and they explained how you have to capitalize everything since the intent is to flip it. If you could expense these items then I should be able to take these deductions the moment the transaction occurs, but that's not the case. Every cost adds to my basis in the property and the profit or loss is realized only when the property is sold. 

That's pretty cool. Sounds like you have options to consider. 

Regarding the title docs...usually you can do a resolution agreement and have all LLC members sign it, which will allow you to be the only signer at closing. This is what my partner and I do in our flipping business (we are 50/50 as well.) We simply sign the resolution agreement for each property and it allows me to be the only one needed at closing to sign. I've even done this on larger deals with many people in it. Last year myself and a partner purchased a wedding venue and a smaller hotel (7-unit) and had some silent investors in each deal. We all signed a resolution agreement and only myself and partner (who were personal guarantors) had to sign at closing. I'd look into this if you go this route.

Sounds like you have a solid plan in place and just need to execute now! Best of luck!  

Hello BP community,

For house flippers doing consistent deals, what tool(s) do you use for accounting? I've tried QB (admittedly, didn't try for long) and it didn't seem to be a good fit. Seemed like QB would be good for a rental, but since with flips you have to capitalize every cost and everything is essentially on the balance sheet (versus the P&L) it didn't seem to work properly. Now, I manually export CC and bank statements into CSV files and then separate each transaction where it needs to go. I do at the end of each year and really dread it. It is super tedious and hurts my brain. 

For instance, we bought/sold 5 flips last year so we have 5 "buckets" each transaction could fall in PLUS our general office expenses (Google ads, Propstream, DealSimple, etc.) 

I manually go through every transaction to drop in the right "bucket" to figure out our profit for each deal and then I give to my CPA. Is there an easier way to do this? I've done this for years now and feel there has got to be a better way.

@Nick Coons Got it. All makes perfect sense. The only issue I see with him not owning any of the holding entity is in regards to how he is paid. If he doesn't own any of the entity, it won't be "K-1 income." I'm not really sure what kind of income it would be. I suppose you could pay him as a 1099 contractor in an advisor role or something like that. I think this is a good CPA question. Just something to think on. Otherwise, I like this structure. 

I have a partner and him and I have a flipping company that we own 50/50. Luckily we have close relationships with our hard money sources and are able to get 100% of the purchase price plus renovation costs so we do not have to worry about running out of cash. I get that it's more risk due to higher leverage in this scenario, but we have always been hyper focused on "buying right" and feel this alleviates some of the risk. Would you do something like this if you could? Because I feel like over time you are going to give a lot away with this structure. Not sure your experience level.....maybe it makes sense to do a few deals this way and then transition to a 100% debt structure like I've described.  

@Nick Coons it sounds like you've been thoughtful about how to structure this, and at quick glance it makes sense. You're essentially looking for an equity partner that'll share in the upside with you. As opposed to a debt partner (hard money) that gets a fixed amount and doesn't share in the upside. You give up some upside, but you also have less downside risk. Makes sense. 

I would think the best way to do it is to have a set agreement with someone (ie. John Doe) and form an entity that you both own 50/50. This entity (John and Nick LLC) would then own the property, and all profit/loss would flow through this entity to you and the investor. If you spell this out and show all the different scenarios for how this could turn out (good, bad, ugly) then I think it makes perfect sense for an investor to do something like this.

One thing to think on is the capital contribution from the investor. If I were you, I would structure it where the investor is putting up all the equity needed, as opposed to piece mealing it as you described. If you want to show "skin in the game" to the investor, show them how you sign a personal guarantee for the hard money loan and that should be enough to show that interests are aligned. And if they know you well like you mentioned, then they likely trust you already and this isn't necessary. You're contributing the "sweat equity" and the investor contributes the capital. Simple as that. 

Also, one thing I thought of as I'm typing this is to figure out how much the investor will commit to this. I'm assuming all decisions will be made by you regarding whether to move forward with a deal or not. If this is the case, you essentially want a pool of money that you can tap at any minute. If this is not clearly defined, the investor might get cold feet. But if they commit it ahead of time and sign something stating so, then you know that money is available. How much they commit depends on what each side is looking for, but if you get someone to commit $150k or so, that should get you through at least 2 deals at the same time based on the numbers you wrote down. Hope this helps!

I agree with @Kerry Noble Jr but would add that you will probably be able to find some people by going to local meetups or REIA meetings. There is probably someone out there in the same boat as you trying to find the same thing. I think if you attend enough meetings, you'll find the right person. Hope this helps!

@Aimee Piacentino You really won't start learning until you get into your first deal. All the "textbook" learning from reading forums, going to meetups, etc. is good. BUT, experience certainly trumps everything so I wouldn't try to have all the answers at this stage. Once you do your first flip you will likely look back and realize how little you knew prior to that!

The best option would likely be some kind of private hard money where there are less hoops to jump through compared to Kiavi or Fund That Flip. We've always gone the private route for this reason. You are also more likely to get 100% financing or even 100% + reno funds with a private lender. But, this really depends on how good the deal is that you find and how well you buy it. If you are buying a property for 50 cents on the dollar (ARV) then there isn't a ton of risk from a lending standpoint and doing a 100% loan isn't out of the question.

In terms of your last question, we generally shoot for the higher of $40,000 profit or 10% of the ARV. But this is subjective and everyone might be higher or lower than this. Flips are a lot of risk and work and we want to be compensated accordingly.

One last thing to add, is to be laser-focused on the ARV when doing your numbers prior to making an offer. This is the one thing that can make or break a deal if you get it wrong. And this is true ESPECIALLY in the current market we are in. If in doubt at all about the ARV and where it'll be a few months from now, drop it lower. Way better to miss out on a deal because you offered a low price than to be caught with a deal that loses money or breaks even. On the first deal I did, everything went wrong and we made tons of mistakes, but the one thing we didn't mess up is the ARV and how we bought it. We still ended up walking away with almost $50k despite all our errors. Be ultra-conservative on the ARV!

@Nick Benjamin We have primarily used Google Ads. I agree with @Tyler Fontaine and @Eliott Elias about relationship building though. In the past we have gotten random deals just from our network and people knowing what we do. Staying top of mind is important for any relationship type of business. 

But, in 2022 for our house flipping business, every deal was off-market generated from Google Ads. We spent about $20k directly on Google Ads and then $12k ($1k per month) for someone to manage the campaign, and in 2022 we generated $286k in profit from these flips. We also bought another property where the lead came from Google that we are now operating as an Airbnb. 

It was definitely a long road to get there, and we still have a hot/cold relationship with Google Ads, but it is clearly profitable and has been working for us to source off market deals. Hope this helps and feel free to reach out with any questions related to this!

 Completely agree with @Andy Sabisch here. This sounds like a very thin deal already even at your price, and the market is weird right now, AND you have some dummy realtor giving him bad information. Everything is stacked against you and I think it is a waste of time to pursue further. I would punt. 

We had a similar situation where it was a husband/wife getting divorced. Our relationship was with the wife, and we never interacted with the husband. We offered $425k back in July and she wanted to do it but he had some realtor in his ear and they ended up listing it. We told her best of luck and to reach out if they aren't able to sell. Sure enough, they weren't able to sell, market worsened, and she came back to us. We re-looked at the numbers and with the data point of them listing and being unable to sell, we were nervous and offered $50k lower than our original price, and they ended up taking it. 

I think it is a great and horrible time to be flipping. It is horrible because of the market, but that is also what makes it great. Sellers are no longer able to list an as-is dump and sell for above asking price. The value proposition of off market cash buyers has significantly improved and we are very cognizant of that. There is absolutely no need to do thin deals like the one you are looking at in this market. I'd be patient, and once reality sets in for people like the seller you are talking to, they will realize you are giving good info and they should listen to you (assuming you are giving good info!)

 Haha probably a great decision! If it sounds too good to be true....