My First Flip: Before & After

Rehabbing & House Flipping
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My First Flip: Before & After

Rachel Gill
Investor · Baltimore, MD · Member since 2014 · 78 posts · 48 votes

Although this took way longer than expected due to contractor issues, I'm proud of the way it turned out and happy to report that it is under contract after on 3 days on the market!  It's a 3BR, 2 full bath row home in Baltimore, MD and we added an additional BR in the basement.  (See before & after pics below)

Breakdown is as follows:

Purchase Price $54K

Rehab $50K ($8K over budget)

Holding costs $8K

Under Contract $140K

Approx Profit $12K

Due to holding longer than expected(almost 6 months) and unbudgeted rehab costs the profit is less than I had hoped, but still not too shabby for a first timer.  I had a lot of help along the way from my Hard Money Lender and a Mentor and learned a lot of hard lessons, but I'm so glad I jumped in feet first and accomplished this.  I'm now on the hunt for my second and hopefully third flip.  

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Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
11y
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.

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  • Erika Carter
    Residential Real Estate Broker · Chicago, IL · Member since 2014 · 155 posts · 42 votes
    10y

    OMG!!! The updated pics are wonderful!!!!  Great article!

    0Reply
  • Erin Beason
    Supervisor · Miami, FL · Member since 2015 · 3 posts · 0 votes
    10y

    Wow nice! Congrats.

    0Reply
  • Jeff Darr
    Investor / Education · Moreno Valley, CA · Member since 2014 · 18 posts · 5 votes
    10y

    Hi @Rachel Gill,

    That's wonderful and inspiring! Congrats!!

    0Reply
  • Krista Walker
    Cave Creek, AZ · Member since 2015 · 51 posts · 13 votes
    10y

    Wow! That looks great!

    0Reply
  • Charles Milford
    Truck Driver · Cincinnati, OH · Member since 2015 · 5 posts · 2 votes
    10y

    Congrats, 

    I'm new to real estate but post like this give me hope. I cant wait until I get the ball rolling..... Great Job! #BeautifulTransformation

    0Reply
  • Bryan Rodriguez
    Investor · Colorado Springs , CO · Member since 2013 · 77 posts · 22 votes
    10y

    Inspiring! I hope to do the same shortly. Thanks for your story. 

    0Reply
  • Anthony Alexander
    Agent/Investor · Baltimore, MD · Member since 2015 · 26 posts · 3 votes
    10y

    Great staging, It really helps sell the house.

    0Reply
  • Carolyn L.
    Home Stager · Sussex, WI · Member since 2012 · 170 posts · 64 votes
    10y

    Beautiful job @Rachel Gill! Congratulations!!

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    Wow, that is a fantastic job, very impressive for anyone, let alone a first timer; you have great taste!

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  • Account Closed
    Real Estate Investor · Fresno, CA · Member since 2015 · 133 posts · 9 votes
    10y

    Sorrie; may someone be kind enough explain me i assume is lingo.

    Breakdown is as follows:

    Purchase Price $54K

    Rehab $50K ($8K over budget)

    Holding costs $8K

    Under Contract $140K

    Approx Profit $12K

    She bought the house for 54k; she went 8k over her budget on rehab costs. Holding costs whs this; oh perhapps; loan during the term..under contract. 140k is this her selling price. Oh i think i got it 54+50 104. Mortgage other costs 8k 122. Sold for 140k 18k. How would she get 12k.

    0Reply
  • Alfredo O.
    Arlington, TX · Member since 2015 · 220 posts · 40 votes
    10y

    Wow,  Great move!   Hope my first flip turns out as well

    0Reply
  • Ben Wendt
    Investor · Wilmington, DE · Member since 2015 · 55 posts · 19 votes
    10y

    Splendid job. The good photos really make your work pop!

    0Reply
  • Iwetta Bobka
    Real Estate Agent · Elgin, IL · Member since 2015 · 7 posts · 2 votes
    10y

    Great job Rachel!!! All looks great but love kitchen and light fixtures. 

    0Reply
  • Keitha Lovett
    Stone Mountain, GA · Member since 2015 · 17 posts · 3 votes
    10y

    OMG!!!  Great job especially for your first... KUDOS..

    0Reply
  • Jarrett Shippen
    Newark, DE · Member since 2015 · 4 posts · 2 votes
    10y
    Wow that was a great transformation. You said along the way you learned some hard lessons do you mind sharing some.
    0Reply
  • Bhekizwe M.
    Bulawayo, Zimbabwe · Member since 2015 · 1k+ posts · 253 votes
    10y

    congrats.well done on the flip

    0Reply
  • Shannon K.
    Buffalo, NY · Member since 2015 · 252 posts · 109 votes
    10y

    I know this is a bit old, sorry, but I just began posting here... Did you use HDR camera mode to capture your beautiful transformation? The pics look terrific!

    0Reply
  • Polar Prutaseranee
    Flipper/Rehabber · Tustin, CA · Member since 2015 · 433 posts · 103 votes
    10y

    Great job

    0Reply
  • Boyd Hunter
    Self employed · Wallacia, NSW · Member since 2015 · 60 posts · 6 votes
    10y
    Nice work, and you didn't lose any $$
    0Reply
  • JORGE RIVERA
    Real Estate Agent · Miami, FL · Member since 2015 · 8 posts · 0 votes
    10y

    Awesome job!!! I am so looking forward to doing my first flip also. Having financial issues though, but I am determined to overcome that. Great job. 

    0Reply
  • Jackelyn Gonzalez
    Lender · Los Angeles, CA · Member since 2015 · 121 posts · 28 votes
    10y

    Amazing!

    0Reply
  • Jackelyn Gonzalez
    Lender · Los Angeles, CA · Member since 2015 · 121 posts · 28 votes
    10y

    Amazing!

    0Reply
  • Emily Lopez
    Real Estate Broker · Rock Springs, WY · Member since 2015 · 57 posts · 43 votes
    10y

    Really, really nice job.  First one's the hardest. Now, you're off to the races :) 

    0Reply
  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    10y

    Beautiful work, I'm jealous of your photographs as well... Impressive!

    0Reply
  • Mags S.
    Rental Property Investor · Phila, PA · Member since 2015 · 276 posts · 111 votes
    10y

    very inspirational! 

    0Reply
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