I have crunched the numbers and factored vacancy, maintenance, capital, and management expenses and the property has a negative cash flow.Since we have a 15 year mortgage and appreciation, we have about 100K-140K in equity on that property I really don’t know until we have it appraised.

Is the developer small and local, or big and national?

Saw this over at MMM and thought this would be of interest to any live-in flippers expecting to have their capital gains shielded from taxation when they sell...It seems the House tax plan would redefine "principal residence" as a place one has lived in for 5 of the past 8 years rather than 2 of the past 5:SEC. 1402.

I will be educating myself as much as possible over the next year before I start working so I can hit the ground running when I have acquired enough knowledge and some capital.  

I don't have any real capital to jump in with at the moment, my wife isn't able to work right now so my single income doesn't stretch as far as it used to. 

Would the operating agreement call for 100% profile/loss/capital to the seller and 0% for the buyer and it would be suggested that the buyer buys a certain percentage of the LLC from the seller every year? 

I did a BRRRR this last spring in Renton which I had to leave approx $31k of my capital in the deal because my all in after rehab costs came out to around 84% of the ARV.

The usual scenario is to leverage your return higher by borrowing at interest rate lower than your cap rate.In your example, assuming no capital expenditures, loan costs, closing costs, etc... a 7.7% CAP and 80% loan, rough estimates of your CoC return at different interest rates might look like below: Interest Rate Cash on Cash Return 4.0% 15.6% 5.0% 12.7% 6.0% 9.7%As you can see the lower the interest rate on the loan the higher the return.Cheers...

Without the depreciation recapture rules under, the $10,000 (sale price of 10, 000 - your basis of 0 ) gain you recognized will be taxable as capital gain under at a maximum rate of 20%.Thus, the sale of the machine in Year 2 would increase your federal income taxes by only $2,000 ($10,000 × 20%) (and would not be subject to self-employment taxes).

Therefor you can find great cash-flow for less capital and lower competition from owner-occupants/flippers.Lesson to be learned is getting feet on the ground in those neighborhoods to understand the differences in product type and highest/best use.