My First Flip: Before & After

128 Replies

Originally posted by @Cynthia Matsumoto :

what has happened with the taxes - was a great big chunk taken - are you going to have to pay a capitol gains tax?

 Hi Cynthia, 

I will definitely have to pay income tax on the money because I'm currently set up as an LLC, which is considered a disregarded entity by the IRS, which means I will have to add my profit as income on my tax returns. I'm going to reinvest my profit in the business, but will definitely set aside some money for the taxes.

congratulation. the staging is nice and modern did you do it yourself? the pictures also look fabulous, did you use granite on the kitchen ? or did you find a way to make it look like granite in a cheaper way . it looks beautiful. the paint color was a great choice. 

Nice, I'm looking to do the same as well by the holidays. 

Congrats!!! Looks sharp. You deff should be proud. Definitely don't wait too long to turn around and do it again. Once in stride, always in stride...

Originally posted by @Rachel Gill :
Originally posted by @Cynthia Matsumoto:

what has happened with the taxes - was a great big chunk taken - are you going to have to pay a capitol gains tax?

 Hi Cynthia, 

I will definitely have to pay income tax on the money because I'm currently set up as an LLC, which is considered a disregarded entity by the IRS, which means I will have to add my profit as income on my tax returns. I'm going to reinvest my profit in the business, but will definitely set aside some money for the taxes.

This question gets asked a ton on BP and while it is a great question, it is often stated wrong and even answered wrong. To be crystal clear, flipping a home resulting in a profit is not "capital gains" rather, the income is taxed as ordinary income. An LLC used to flip would result in the LLCS profit passing through to the managing member in a K1. That income would then be reported on the personal tax return as ordinary income.

You should always consult a knowledgeable CPA familiar with real estate transactions, however, an LLC is not typically the best entity for flipping. In most cases, an S Corp is better or an LLC with S Corp tax election.

Disclaimer: I am not a CPA and this info is not to be considered tax advice, just my personal experience.

On another note, great job and the turnaround, it does look great. I'm sure you learned quite a bit by jumping in and doing and to summarize, if using a GC, always run a check on their license number, always have a written contract, always have deadlines and draws determined, never pay ahead of the work completed, and time crunch or not, make sure the home is 100% ready for photos for listing, it makes a difference.

Originally posted by @Patricio P. :

@Rachel Gill The house looks fantastic. Congrats on a job well done! The pictures came out really nice, did you take it yourself, use a real estate photographer, or did your agent handle this?

 Hi Patricio,

My agent has professional photos taken.  Definitely makes a big difference!

Wow. I am putting in a offer on my first investment house to flip, but I don't think it is going to look that good. That looks like something out of the TV show "Flip This House" Congrats, Beautiful job.

Wow! This looks amazing. I don't think I'd be able to do that for my first flip because of the cost, but the transformation is an eye opener.

Hey @Rachel Gill , what a beautiful rehab!  Is that grey subway tile with with white grout in the bathroom??!!  My wife will LOVE that.  Wherever did you find it?

Thank you so much for sharing your story.  It's important for people to see that it is do-able, and there will be issues, no matter how experienced you are.  I ran into some serious contractor issues on my first few deals, and while painful and stressful, I've learned a ton.

Can't wait to see the next one!

@Rachel Gill I believe that you said you used a hard money loan on this flip. I'm trying to get started. Who did you use and how much money down did you give? Also what were your fees to pay back?

Do you think it's a better idea to flip a house and sell or flip and keep it as a rental property? I know they're two very different things, but in the long run, do you think renting is to large of a risk? Thanks so much.