New and possible 1st deal questions!

[Ryan Lucht]

Hello, 

My name is Ryan and I live in the Milwaukee, WI area. Been lurking around here and listening to podcasts quite a bit without ever really jumping on anything. With a recent death in my girlfriend's family, I want to make my first move (flip). 

First some basic info. 

• I own a primary residence with about 35k in equity (around 23%)
• My longtime girlfriend (essentially married without caring about marriage) has never owned a property and currently lives with me.
• Property would be sold to me for 115k
• Estimated value between 150-175k
• Do not have a ton of cash on hand. I could pull from equity and some investments but would like to keep the upfront cost as low as possible
• I have not personally seen the property yet but have been told by someone I trust (and has rental units) that it is in good shape. Needs exterior grading and sump pump for sure (makes me think possible water damage in the basement)
• Both my girlfriend and I have 800+ credit scores
• I need to decide on this very quickly

My questions are all basically money related

• I would say this would be a one and done flip for now. We plan to do more in the future but want to see how this goes. I do not know if we would try to defer taxes. 
• Would it make sense for my GF to sign a traditional mortgage for this with 3-5% down? 
• I am assuming (dangerous i know) that it would appraise for more than 115 as it lays today, the family just wants to be rid of it with as little fuss as possible. 
• How do taxes work? From what I have read it sounds like it will be taxed just like my salary as an active income if we sell within a year, plus a self-employment tax. So like 23% + around 13% for the self employment. Is that more or less correct?

I really would like to act on this at it seems like it could work on and would be an easy way into the life but the money part is stressing me out. We could carry a second mortgage on the house if we need to for the few months it will take to flip, I just want to be sure to go about this is the most profitable way. 

Thanks all!

Ryan

[Mark Trebor]

Hate saying it but you might be biting off a little more then you can chew right now.  Not having a concrete plan and the dragging the girlfriend into this might be a bad move???  One and done, so are you doing the work yourself or going to hire a general contractor to update it?  Are you getting your confidence from HGTV? Be careful if you are :)  Contractor = extra money out of your pocket, doing it yourself = extra time out of your life, do you have the tools and know how to do this stuff?  Does your girlfriend have a good job that she can float the mortgage by herself on the note.  Have you considered all of the carrying costs (utilities, mortgage, etc.) 

If you flip it and don't hold for more then 2 years then yes you will have to pay taxes on any of your gains.  Paying taxes are probably unavoidable maybe you could meet with a real estate accountant to do something fancy like a 1031 exchange with the fix and flip and 1031 with your current house take the equity in both properties and roll them together into a new bigger house? or a similar house that would be closer to paid off?  Just some ideas.  Let the GF make the decision that way if it fails its not your fault.... good luck!