I started flipping in Dallas earlier this year. To date, have completed 1, have 1 in escrow, and close on 4 purchases this week. Most are being bought in wholesale, some conventionally financed too.

Wanted to hear experiences of others and especially now, I’m finding the Dallas market to be super competitive in the sub $200k category.

That said, my flips have varied in price; buying as low as $110 in wholesale/auction, to paying as much as $500k in Frisco for something that’s about $25/ft below market.

First deal was all cash: $143k all in, sold for $184,500 in Arlington (day 1). Netted just over $20k after closing costs (by the way, what's reasonable closing costs here: I paid 8.4%). 120 days purchase to funding (FHA buyer pushed us out a month)

Deal 2: bought for $148k in Arlington again, this time on finance. Put up $60k after rehab and sold for $225k (appraisal came in at $211 and we settled at that number). We will net about $20k cash on the $60k invested and this will fund August 8.

Other 4 are underway and will all be hitting the market in mid-late August.

I’ve done this by raising capital: nothing of my own. Raised about $800k in the last 4 months.

Would love to hear from the experts:

- How are you finding and funding deals?

- How are you structuring?

- How are you mitigating tax on ordinary flip income?

- Are you using LLC or under personal name?

- How would you structure the profit split? I do a variety, but mostly: 70/30 on profit (greater amount to investor) and add a 1-2% management fee on sale price depending on return. Also working on getting my agent to offer some type of volume deal.

Looking to use income from flips to purchase and grow out personal buy and hold portfolio.

Super excited to read your responses - welcome all feedback and questions.

Thank you and stay safe out there!

Haider

Ps. A bit about me:

Live in Irvine, CA. Moved from Toronto in October 2018. Have 3 houses back in Toronto and love the real estate game. Like many of you, working a full time day job and trying to turn this side hustle into my only hustle.

I think you realize how much more opportunity there is in the US vs Toronto..

I'm about 1 1/2 hours outside Dallas and the local market is oversaturated with flippers. Some are getting stuck with properties that won't sell. They are even having to compete with new construction selling for the same prices they want to sell their flips at. 

I am flipping 3-5 properties a month in DFW. If you do the flip right, you'll do just fine. The market isn't slowing down. 

FYI, if you were raising money and you were charging a 1-2% management, I would not be working with you. Your income should derive from how you perform, not by managing people's money especially with only 1 property completed. Also, yes, set up an LLC. Do not buy properties in your personal name.

I mainly buy from wholesalers who I have had a long term relationship with. That's where I source most of my properties.

Also, tax purposes, if it's your main job then you'll be taxed ordinary income, no way around that. You can set up your LLC with an scorp and pay yourself a W2 and avoid a lot of the self employment tax though.

@Haider Abdullah consider yourself lucky to be honest. I know so many people that are losing money left and right on flipping. Sounds like you've built a good team locally here though which is the biggest issue people run into. I've done a few myself but definitely prefer to play the long game with buy and holds then stress over the finances of flipping for a quick $20,000. 

@Joseph Pytcher thanks. I realized I didn’t stipulate when I get the “management fee” - only after a minimum return percentage is achieved. So if the house sells for $250k and we made 15%, I’ll then take a 1% fee on the sale price...

Appreciate the note, and definitely hoping to ramp up to greater volume!

I’ve been looking in Arlington, Frisco, Garland, Mesquite, Plano, and now opening up to Fort Worth...open time recommendations

@Kenneth McKeown thanks! The initial intent was to buy and hold but I was fortunate to have access to some solid folks and built out the team. They’ve been running at 200mph and delivering some amazing things. 

I'm also buying with a rent hedge in mind. So the areas we buy typically have decent rental opportunities so worst case, we BRRRR

@Eric James it's crazy to see how many more folks are showing up at auctions. But I still feel if we can achieve buying at 70% or better ARV then we can still turn a profit. May not always be a huge one, but we can turn one.

@Hai Loc huge difference in market! And from a buy and hold perspective, no chance at getting 1% RTV unless you add basement.

I think you're dreaming if you think you can do 70% or better in all honesty. Just want you to set the right expectations for you. 95% of the deals I get are at 80-82%. The name of the game in DFW is volume if you want to be successful. Holding out for 70% deals just isn't going to happen. 

@Haider Abdullah Congrats. Sounds like you are having lots of fun and making some money.

About me. I typically have one new construction and 1 or 2 flips going at any given time.

- How are you finding and funding deals? Finding most my deals from referrals and wholesalers. funding with mostly private money

- How are you structuring? I own them and pay the lender a fair return on their money. ranges from 4.9%-10% depending on the deal.

- How are you mitigating tax on ordinary flip income? I have many write offs from my other businesses.

- Are you using LLC or under personal name? LLC's

- How would you structure the profit split? I do a variety, but mostly: 70/30 on profit (greater amount to investor) and add a 1-2% management fee on sale price depending on return. Also working on getting my agent to offer some type of volume deal. ----I would scratch the management fee and just pay the owner either a straight interest rate or straight split. Nothing complicated. You need more than 30% of the split to justify your time. I am not sure I understand your "volume deal" from your agent. If you are buying flips from an agent...they are not deals. Wholesalers or sourcing the properties yourself if the only way to do flips in volume.

Best of luck. My advice is don't go too fast. Lots of moving parts can go wrong if you are sitting in California and the deal is in Texas.

Originally posted by @Haider Abdullah :

@Eric James it's crazy to see how many more folks are showing up at auctions. But I still feel if we can achieve buying at 70% or better ARV then we can still turn a profit. May not always be a huge one, but we can turn one.

Yes, if you can buy at the right price your good. The problem is when all the wannabe flippers drive prices up to high to be worthwhile. 

Joseph 

You're dead on my friend. Have you ever mentored in real estate before? you write as if you have. Great insight on the DFW real estate market, keep them coming. 

Thanks Vernon, no I don't mentor but I've been doing this a long time. 

Joseph 

@Eric James

Which area is this ?

@Eric James I’m buying in Dallas. Focusing on areas like Arlington, Mesquite, Garland, Plano...

@Kyle Mccaw thanks for the note! I’m buying from wholesale and then selling with my real estate team out there. Working out some form of kick back on their commissions based on volume. 

I’m hoping to do 10-12 this year so let’s see. Definitely agree on the “pace”...stuff is like a drug and such a high when you’re in the game

I would avoid Mesquite. The city is getting extremely aggressive on flippers. If they see ANY construction going on they'll put a stop order on your door and make you pull a permit and their inspection process is terrible. You'll spend WAY more on construction than you think if you do a deal in Mesquite, and you will get caught, trust me lol  

I don’t know.. maybe it’s just because I see all the good and bad of flipping - but doing 10-12 a year to just make $100-120k if things go well - with the high risk of something going bad and potentially eliminating half that profit seems like such a headache. But I’m also someone who is all in on buy and holds and not flips. Lol

@Kenneth McKeown Totally get it, the key is to find a formula that works for you, apply that to every house you flip and run with it. Trying to design every house from scratch is going to cost you time and money. I take 1-2 templates, apply them to each house, and that's the finish out we do on every single one. I flip 35+ properties a year and I average about $16-18k on each one. Sometimes less, sometimes more, but on just about every house I use the same carpet, flooring, paint colors, exterior paint colors, cabinets, etc. The key is to figure out what works for you, from a design and cost perspective and of course, making sure it conforms to current market trends and just run with it, making changes periodically as markets change. 

That’s awesome @Joseph Pytcher . What’s your total net after all expenses? I assume the $16k is profit but then you have outside expenses ? Any of those 35 you keep long term? Definitely better off when you’ve got it all down to a T versus an investor doing their first or second flip and barely breaking even. See it too many times. Plus the market is so saturated with wanna be flippers. 

@Kenneth McKeown

I have business level expenses of course but that $16-18k is net on a per home basis. I have about 8 rentals that I've kept, would like to get up to 50 within the next 5 years or so.

Don't get me wrong, when I first started, I lost money on my first two deals, but I just kept going and it's paid off. 

@Joseph Pytcher love hearing that. I’ve got 9 doors myself and growing. Little less risk in my business though 😅😅

@Kenneth McKeown Absolutely! I do build custom homes though which takes up the majority of my time. I have a good team that handles the flips which is almost automated at this point. Once non-QM loans open back up, I'll probably start loading up on more rentals. I've had to pause that due to all the covid stuff. 

Originally posted by @Haider Abdullah :

@Hai Loc huge difference in market! And from a buy and hold perspective, no chance at getting 1% RTV unless you add basement.

Can't even get 1% with basement.. need 2 bed 1 bath suites on 1st and red floor