Hello! My name is Jennifer Heeter I am 38, a single mom and a newbie to Biggerpockets-- this is also my first post. I'm from North Central Iowa and I just bought my first house EVER back in August. I live in the house and work a full time factory job. I decided to do some cosmetic updates to the house while I am in it (new flooring, paint, appliances, counter top then staged it with new furniture) all with the idea to flip it. I did most of the work myself so probably only put about $7,500 into it. I bought it for $95,000 with 5% down on a first time home buyers grant of $7,500 of which I will need to pay back at the time of sale. I spoke with a local realtor who did a walk through of the house before the updates were made and she said I did pretty good buying it at that price and that I should be able to sell it in the 120's after the updates. The market I'm in moves incredibly slow. I currently have it listed FSBO at $129,500 I listed it at the beginning of December and have had one showing this week, the potential buyer is a single mom with two boys, she really likes the house but feels it may be to small, which it is at only 1,000 sq ft 2 bd 1.5 bath however has potential for expansion in the basement. My goal for selling the house is to hopefully sell at $125,000 which would give me a profit of about $28,000 in which I would be able to pay of ALL of my debt and reinvest to do another house. I have posted it on local Facebook groups, craigslist as well as Zillow. Obviously I want to move this as fast as possible so my question is, are there any tips or suggestions you can give as to how I can do that? I am considering dropping the price or listing with a Realtor but concerned if I drop the price to soon then end up listing with a realtor later that I will be losing to much of my profit. Also, I haven't heard back yet from the potential buyer who walked through so was wondering if there is anything I could or should do to "help" her in the decision making process? We are in a town of only 1,500 people so it's a very personable friendly way of doing business type of feel. Thank you for taking the time to reply, any help is soooooo appreciated!!! I inserted a link for photos.... I hope it posted, can't tell ;-)
Here is the link to my house in case it didn't show up in the original post.
I know St Ansgar well, I am from Rudd and live in Garner now.
My suggestion is you should wait until after next August. If you live there for 2 years you dont pay capital gains tax.
As you know with our -20 temps in the last week, not a lot of people are really looking hard. In the summer itll move better.
Some people supplement their income very well by doing live in flips and live there for 2 yrs then sell.
How does the grant work? Is it laddered? Where if you live there a yr you only have to pay 80% back? I got a veterans grant and it was 5yrs rolling 20% off each year.
If you used Iowa's program it has a 9yr recapture tax for profits but I dont know the details, I would ask your CPA. Last thing you want to do is sell the house and not have the opportunity to take advantage of that again and also not make much profit after all the taxes.
Id definitely suggest you talk to a CPA to figure your "actual take home profits" on the sale at 125k.
What are you going to do when you move? You'll probably need 10-20% down on your next home sinve you won'thave the grant.
As far as helping her... show her all the grants and help available to her. The things you used. Another option is to offer the 3% buyers agent commision then other realtor will be apt to show it. $3,750 is better than $7,500.
Good advice. Staying put so that you can roll over the profit instead of paying gains on it will help your net profit, as well as minimizing your payback to the grant. Those are usually stepped, so you owe them less each year that you own it.
When it comes time to sell, based on everything you are saying about your town and market movement, I would hire a Realtor. It will be worth the money to let a professional use their marketing skills to maximize your reach, and follow up with Buyers. If you haven't heard back from this Buyer and it's been a couple of weeks, then she has moved on. Interested Buyers don't let properties sit. They want to nail them down.
I just glanced at the Zillow listing and expanded out and looked over recently sold houses. Nothing in the 1000 SF range has sold for the price you want. You can try an MLS entry service, for a few hundred dollars, however you will most likely need to offer a buyers agent percentage. With that said, being such a small town/area, I can't confirm if this will help you sell or not.
I hear a lot of people here saying to season he property until the two-year mark. I’m curious, though, what your goal is after this property. It sounds like you want to flip, pay debt, and repeat?
Would you be interested in looking into a 1031 exchange to get into the next flip? If you are in a slow market, you may have the advantage of a) waiting to find the best deal available, or b) find a really motivated seller for your incoming property and get another killer deal. This would protect you, I believe, from the capital gains tax that you would face if you sold now, while also giving you the equity you need in the new place to increase your profits. Last, if you flip the next house as well, you will be looking to list property #2 in a potentially better housing market when weather gets nicer.
Thoughts on trying a property exchange in this situation?
Thank you everyone for your responses! Tim, yes the idea is to flip quickly and then repeat. I like your thoughts on property exchange however I am new to the idea and don't know how that works but would be willing to research more on it to see if it is an option for my situation/goals. Thank you so much for your input. My daughter and I are looking to move to Florida (this year) so selling and flipping this property and maybe a few others in this area as quickly as possible is the goal.
Great! I would definitely look to find someone with experience doing 1031’s, or maybe professional legal advice, when doing a 1031 because my understanding is there are some regulations that need to be followed pretty closely. But it sounds like this might be a good strategy to turn a couple properties before the move.
Also, can you do a 1031 exchange on a primary residence? I live in this house.....
Great question! I read back through your initial post, and I had thought I read you had rented it out. You are right, 1031’s are for investment properties only.
Okay, thank you. I will keep this in mind for future properties!
In this case I would definitely defer to the advice listed in previous posts and either season the property or possibly rent-refinance for a down payment on another? Sorry for misreading your initial post.
Great advice Tim, I will check in on a refinance for another property otherwise just wait it out. Thanks again everyone for all of the feed back, you have been very generous and I appreciate it!
1031 is for investment property only. You cannot do a 1031 on your primary residence UNLESS you turn it into a rental first. @Dave Foster can give you specifics. Generally, you cannot 1031 flips but there are exceptions.
Buy and hold will make the most money over time but that takes patience and the ability to raise OPM to buy more properties.
BTW--if you live there two years with it as your primary residence you can make 250K tax FREE! The rule is you must live there two of the last five years. So, you can stay there two, turn it into a rental, and then sell within 3 years. There is some recapture of depreciation but the 250K gain still comes into play.
@Jennifer Heeter , You cannot use a 1031 exchange on your primary residence. It is for investment property only. and your intent when purchasing the property must be to hold for productive use. Property you purchase primarily to fix n flip does not qualify for 1031 treatment.
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