I would only add this little extra rule. if i am doing a $20k rehab, i want to make $20k. If I am doing a $40k rehab, there better be $40k for me. AVOID doing a $30k rehab just to make $15k.
Notice my use of the word "avoid", it aint set in stone, there are times to break every rule... just think long and hard before you do.
Contractor · Skippack, PA · Member since 2014 · 228 posts · 39 votes
11y
Totally depends on your business structure and what you would like to get paid. Also on your first couple of houses you want to aim high for your "just in case" fund. Also keep in mind your putting months of overhead in, and your taking a large risk. So don't be afraid to compensate yourself for it. The more hands on you are with it the more you should earn on it as well.
I would only add this little extra rule. if i am doing a $20k rehab, i want to make $20k. If I am doing a $40k rehab, there better be $40k for me. AVOID doing a $30k rehab just to make $15k.
Notice my use of the word "avoid", it aint set in stone, there are times to break every rule... just think long and hard before you do.
Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
10y
@Judah Hoover@J Scott A year on, with a HOT Flipping market (we are focusing on Dallas) do you still use the same metrics you mention above? thanks in advance.
@Judah Hoover@J Scott A year on, with a HOT Flipping market (we are focusing on Dallas) do you still use the same metrics you mention above? thanks in advance.
Yes, though we're doing bigger rehabs these days, so I tend to look for a bit higher returns when I know I'll be holding properties a bit longer and spending more on renovations...
Investor · Acworth, GA · Member since 2010 · 30 posts · 6 votes
9y
Have these numbers changed for you all over the past 7 months? We are having a hard time getting offers accepted with 15% profit, trying not to go any lower however we are getting beat by people willing to go down to 10-12%
Investor · Decatur Atlanta, GA · Member since 2011 · 610 posts · 232 votes
9y
I would think 10% is my worst case scenario, but you're still making a profit, gaining experience, and building your portfolio. If your flip takes 3 months where else can you get that type of return in that same time frame....legally. Most stocks are returning less than 10% on a yearly basis.
Real Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
9y
I used to target 15% but something inevitably eats into it, so I've recently raised my target to 20%. Trouble is finding that extra 5% is getting to be pretty difficult.
Makes great sense, but my CPA is still having me pay capital gains and short term gains is killing me.
Get a new CPA if he/she is booking your profit on flipping as capital gains.
While I recognize that you are not a CPA and that what you write here is nothing more than your opinion and as such I should be getting the opinion of a CPA such as @Jim Kennedy or @Brandon Hall but how should a CPA be booking profits from flips if not as capital gains?
As ordinary income. @Brandon Hall is a great resource for this. I believe that he has written blog posts on BP on the subject and I know he has responded to this question a lot here on the forums. I am on my phone right now so searching and pasting links to other threads is a bit of a PITA though I am sure his responses are easy to find if you are at a computer.
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
9y
@James Masotti as @Doug W. correctly stated, flips are booked as ordinary income subject to SE taxes. CPAs booking their clients flips as capital gains are going to be in a world of hurt should their client ever undergo an audit.
If you were to do the one-off flip, I can see the argument for capital gain treatment. But if you're building business on flipping, ordinary income all day.