Stuck in a flip
Investor · Fort Smith, AR · Member since 2013 · 150 posts · 32 votes
Quick rundown of the scenario: I bought a house outright 1 year ago to fix/flip. At that time I had excellent credit. I paid cash for the house and used credit to pay for the fixing. 1 year later the house is done, but it isnt getting much buzz on the market. Ive had it listed since March 1.
As far as the value is concerned I can see the comps and it would more than cover my expenses. I have considered financing it and just renting it out, but now my cards are maxed so even though I havent missed any payments, my credit is trashed. If I just rent it and dont refi, then Ill be spending the next year clearing off those cards and the R.E. portfolio will essentially be put on hold. Any creative thoughts for how to unstuck myself at a bit faster pace?
lesson learned from this one is dont use all of your money for the flip. Leverage is a good thing it helps you react faster it also increases the cost basis for the flip and reduces your taxable cap gain. A full year to fix is too much this is one reason your house may not be getting attention .I can build a house ground up in 90 days after permitting so a flip shouldnt take longer than that. Ok so lets deal with the problem at hand you are getting no traction from your MLS Listing . Drop the listing since your days on market is just going to increase from here and that will limit the buyers. Introduce yourself to every realtor in your area and give them a flyer , host a wine and cheese for them to view the prioerty and point blank ask them what they would do to sell the property. Offer a $5000 bonus in addition to full commission to the agent who can sell it as a pocket listing in the next 30 days. List the house on craigslist , backpage and the other 36 sites that show home listings. List it as both for sale and lease Purchase. If you sell it on a lease purchase you can sell the purchase note at a discount to a note buyer ( contact me first ). You need to take massive action to obtain a result.
When it comes to your credit being trashed well it is just your utilization ratio is tooo high , next time call and ask for increases in your limits as you use the cards and then apply for new cards as you increase your credit , however the best option is a hard money lender and a quick flip!!
hi linda, i agree with you. that is exactly what i am saying. if you refinance a house, it is NOT taxable income. the other gentleman is saying that all profits are taxable. i am saying that if you refinance, the proceeds from refinancing are not taxable. his opinion is that any money that you have made over and above the purchase and rehab costs is taxable regardless if you refinance along the way
I will add a few comments regarding the pictures.
Pic 1 Front of house: Loose the awning if at all possible or edit it down to just cover the front door it dates the house. If the yard hasn’t improved consider sod.
Pic 2 Kitchen: The kitchen seems dated. Clean or paint the base board in the middle lower portion of the picture it looks molded and dirty. Swap out the ceiling fan for a flush mount light fixture. Edit the open cabinets if you can there seem to be a lot of them. I think many women would see all those open shelves and think about how cluttered it would look with all their stuff on display. I would update the cabinet hard ware and also consider painting the cabinets white.
Pic 3: Remove or fix broken fence in back yard
Pic 4, 5 and 6 Den?: This room could use some staging it is hard to tell where furniture would or should go. The awnings really darken this room.
Pic 7 Bed room: Awnings really darken the room and make it feel smaller.
Pic 8 Bed room: This is one of the better pics but as with all of them it needs to be a wider and brighter pic.
Pic 9 Room?: These walls seem to have a lot of texture and look dingy in the pictures. Try to keep close in focus walls out of the add.
Pic 10 Bathroom 1: The paint. The paint on the ceiling looks splotchy in the picture. While fine for certain things Baby Blue could be a turn off for some. Builder beige is a popular color for a reason. Add a toilet paper holder (or hide the toilet paper), a mirror, and vanity lighting. Consider swapping out the vanity top for one of the granite tops at Lowes or Home depot.
Pic 11 Bathroom 2: Same issue with the blue and I would try to update the mirror.
This long and maybe boring post is solely my opinion and is entirely subjective.
Your property needs to show in pictures and in person as well as or better than http://www.realtor.com/realestateandhomes-detail/2...
If a buyer is looking at your house I guaranty you they are looking at the one above!
hi linda, i agree with you. that is exactly what i am saying. if you refinance a house, it is NOT taxable income. the other gentleman is saying that all profits are taxable. i am saying that if you refinance, the proceeds from refinancing are not taxable. his opinion is that any money that you have made over and above the purchase and rehab costs is taxable regardless if you refinance along the way
Mark, any money that you made over and above the purchase and rehab costs ARE taxable. If you refinance along the way, the refinance proceeds are not taxable at the time you refinance. However, if they represent PROFIT when you sell the house, the GAIN is taxable. Example:
Cash Purchase: 100k
Cash Rehab: 50k
After Repair Value: 200k
Refinance: 150k cash out
Sale: 200k
Taxable Income: $50k (200k sale price minus $100k purchase price minus $50k rehab costs)
Example 2:
Cash Purchase 100k
Cash Rehab: 30k
After Repair Value: 200k
Refinance: 150k cash out
Sale: 210k
Taxable Income: $80k ($210k sale price minus $100k purchase price minus $30k rehab costs)
I am ignoring the fact that if you did a cash out rehab, you probably leased it for some time, in which case you would have depreciation and depreciation recapture as well. This example is perfect if you bought and rehabbed it for your personal home, cashed out, and then sold it later. Maybe you did this because you wanted to be in the house long enough to get long-term capital gains treatment or something.
I will add a few comments regarding the pictures.
Pic 1 Front of house: Loose the awning if at all possible or edit it down to just cover the front door it dates the house. If the yard hasn’t improved consider sod.
Pic 2 Kitchen: The kitchen seems dated. Clean or paint the base board in the middle lower portion of the picture it looks molded and dirty. Swap out the ceiling fan for a flush mount light fixture. Edit the open cabinets if you can there seem to be a lot of them. I think many women would see all those open shelves and think about how cluttered it would look with all their stuff on display. I would update the cabinet hard ware and also consider painting the cabinets white.
Pic 3: Remove or fix broken fence in back yard
Pic 4, 5 and 6 Den?: This room could use some staging it is hard to tell where furniture would or should go. The awnings really darken this room.
Pic 7 Bed room: Awnings really darken the room and make it feel smaller.
Pic 8 Bed room: This is one of the better pics but as with all of them it needs to be a wider and brighter pic.
Pic 9 Room?: These walls seem to have a lot of texture and look dingy in the pictures. Try to keep close in focus walls out of the add.
Pic 10 Bathroom 1: The paint. The paint on the ceiling looks splotchy in the picture. While fine for certain things Baby Blue could be a turn off for some. Builder beige is a popular color for a reason. Add a toilet paper holder (or hide the toilet paper), a mirror, and vanity lighting. Consider swapping out the vanity top for one of the granite tops at Lowes or Home depot.
Pic 11 Bathroom 2: Same issue with the blue and I would try to update the mirror.
This long and maybe boring post is solely my opinion and is entirely subjective.
Your property needs to show in pictures and in person as well as or better than http://www.realtor.com/realestateandhomes-detail/2...
If a buyer is looking at your house I guaranty you they are looking at the one above!
Thank you! Now thats some specific advice I can use. Ill work on paints over the near future as I am gonna have to rent it out. The income is necessary at this point. But again, thank you very much.
@Robert Norvell
Kitchens and baths sell houses.The Kitchen. Why no appliances? Typically NEW appliances are part of a newly rehabbed property. You look like you have a very nice counter top and sink fixture but it's not really being showcased. Also it doesn't help that you have what appears to be a can of insecticide on the shelf of one of the kitchen cabinets.
The Bathrooms - Bathroom 1: That I agree that light blue is not a good color choice. Its not neutral enough. Reminds me of 1960's bathroom colors. I would go with all white and as someone mentioned you need a mirror /medicine cabinet on the wall. and the TP should not be sitting on top of the toilet bowl tank. Why no light fixture above the mirror area? Stainless to match the faucet would be nice. Bathroom 2: I would replace the light blue paint with white paint. The door looks like its 2 toned and it looks like a door you would find in an older house.. If that is the case I would paint the door one color and if it's older you might consider changing it. Also the mirror does not match the décor. Is that a medicine cabinet or just a mirror? I would go with just a plain white mirror. Do you have a nice modern light fixture above the mirror? A brushed nickel one to go along with the brushed nickel fixture would be nice.
Thanks! I hadnt considered changing out all the doors, but that might be a good idea as they arent as "crisp" in appearance as some nearby houses.
As Ive said, this is my first flip and Im realizing some of the coloring mistakes Ive made. I should have gone with a much lighter color when I refinished the floor, for instance. All the staining Ive done in the house is a very dark color. The lgihter colors of nearby houses seems better. So I AM paying attention everyone. I appreciate the input and Ill be putting this all in place over the next year as its rented out.