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Updated 9 days ago on . Most recent reply
First-Time Flipper in Bakersfield – Advice on Hard Money Loans & Finding a Partner
Hey BP community,
I’m a licensed real estate agent in California and have held my license for several years now. I’m finally ready to jump into my first flip and have been looking at three potential properties in Bakersfield in the $200–250K range. They’ve got strong comps and relatively light rehab needs, so I’m confident in the resale potential.
I plan to purchase and flip under my LLC, and I have a high credit score.
That said, the hard money lenders I’ve spoken with so far are offering terms around 60% ARV with 100% construction financed. From what I’ve seen and read, that seems a bit conservative—especially for someone with good credit and RE experience, even if this is my first flip.
Is this standard for Bakersfield right now? Or are there ways to negotiate better terms as a first-timer?
One lender suggested I might qualify for stronger terms if I partnered with an experienced flipper. I’m totally open to that, but I’m not sure where to start. What’s the best way to find someone reputable to work with in California, ideally someone who’s active in the Bakersfield area?
Are there meetups, BP members, Facebook groups, or agent connections you’d recommend checking out?
Appreciate any insight or direction. I’m trying to start off on the right foot and minimize mistakes on this first one. Thanks in advance!
Updates: 04/08
I was able to connect with the lender who offers 85% LTC with 10% interest and luckily low and transparent Fees!
I have submitted 1 purchase agreements but was unfortunately outbid by another buyer who went over asking. However, I was able to find another potential property!
Does anyone know if termite damage is very costly? (On the outer exterior of the home) would love any insight! Thank you ❤️
Most Popular Reply
#1 Starting Out Contributor
I don't recommend doing your house flips in an LLC that you personally own because it could cause the IRS to label you as a "dealer." In real estate, being seen as a dealer means the IRS treats your properties like inventory (just like a store selling products). This label comes with several disadvantages. If you're flipping houses, wholesaling, or developing properties, you could lose out on valuable tax benefits such as 1031 exchanges, installment sales, long-term capital gains rates, and depreciation deductions. On top of that, dealers must pay a 15.3% self-employment tax on their real estate profits.
The IRS looks at several factors when deciding if someone is a dealer, such as why you bought the property, how many improvements you made, how often you sell properties, how involved you are in real estate as a business, how much marketing you do, and whether you use a broker. These rules are very broad and can apply to almost anyone actively involved in real estate.
Because of this, it's usually better to run your flipping and similar activities through a corporation instead. A corporation can help you avoid dealer status, offer tax benefits, and protect any passive income you have from being affected.