Low-cost cash flips

Rehabbing & House Flipping
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Low-cost cash flips

Eric P.
New York City, NY · Member since 2016 · 470 posts · 348 votes

I'm considering pursuing flipping. I have about $50-75k in cash I can dedicate to this, and I'd like to fund the entire operation in cash (purchase and rehab). This is impossible where I live in nyc, so I'm wondering where is a better place to do this with $50-75k in cash.

Fyi, I already have experience with out of state buy and hold (including out of state rehabs on these houses). It took me 6 months to build my team the last time around, so I am very patient and willing to spend many months building up a team if I can find the right place to flip in cash using $50-75k in cash.

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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
9y

@Eric P., Oof is right!  Flips do not qualify for 1031 because your intent when you buy the property is primarily to resell.  If your intent is primarily to hold for productive use then you can use the 1031.  It's not as simple as a fixed holding period.  There is no statutory holding period.  Certainly the longer the better.  Most conservative folks would say more than a year but there can always be circumstances where less may be acceptable or more required.

You're absolutely right about the enormous tax bill generated by ordinary income coupled with self-employment tax, and HCA surcharge.  The answer is to change your model slightly from a fix n flip model to a fix n rent n evaluate model.  Now  you lessen your tax burden whether or not you 1031. You potentially completely mitigate taxes altogether using the 1031.  And you generate the significant tax deductions and cash flow that allow you to ratchet your investing almost as quickly as the work intensive flip model.  Let the tenants pay the bills for a while.

The 1031 Investor5137 Reviews
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  • Ruth Bayang
    Investor · Kent, WA · Member since 2015 · 624 posts · 274 votes
    9y

    West and East coasts are out. Somewhere in the middle of the country for that kind of price point.
    Have you considered crowdfunding sites like Holdfolio.com and GroundFloor.us ?

    0Reply
  • Ryan Keeton
    Investor · Ashland, KY · Member since 2016 · 67 posts · 15 votes
    9y

    Any particular states that your open to or looking for? Are you looking for partners or just trying to scout more than anything for a project all on your own?

    0Reply
  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    9y

    @Eric P. You could do that in my area in smaller towns outside of Atlanta. Purchase for $30-40k spend $10-20k on rehab and sell for $60-70k. The problem I have seen doing that is that there just isn't much margin in it. Rehab costs are the same as higher end properties as are holding costs and closing costs. Do you really want to do all that work to make a few thousand dollars? You are better off using hard money and flipping in a higher priced market.

    3Reply
  • Eric P.
    OP
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    9y

    Ah, didn't think about that. Excellent point, @Jeff Kehl

    So what is a good / more reasonable price point for buying houses to flip? What is a price point at which you'll have much better margins?

    0Reply
  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    9y

    @Eric P. I'm selling one right now that I bought for $110k put $10k in and am under contract to sell for $150k that will give me a profit of about $20k after sales and holding costs. That's sort of mid-market for our area and is fairly in demand. I had 2 offers the first day we listed it for sale.

    I still buy the lower priced ones and rehab them but then I hold them as rentals.

    Sort of a rule of thumb for me is anything under $100k = rental above $100k is a potential flip.

    It's a bit of a slippery slope though because I avoid higher end homes which would be $400k+ in our market because they are harder to sell and I don't want to get stuck with one in a downturn.

    2Reply
  • Eric P.
    OP
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    9y

    Wow, that's pretty nice. Ok, sounds like it might be better if I wait a year till I have $150k in cash - then I can operate at a higher price point by buying $100k+ houses. That said, any recommendations on what cities I should try at that price point?

    0Reply
  • James Ritter
    Glen Cove, NY · Member since 2015 · 110 posts · 18 votes
    9y

    I am in NYC also, have about 100-150K in cash to invest and am looking for a partner. Would you be willing to partner on a deal or two around us?

    1Reply
  • Jeff Kehl
    Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    9y

    @Eric P. Flipping is something that I believe you need to be close enough to to pay really good attention. So if I were you I would look in areas around NYC, Pennsylvania, New Jersey, Rhode Island. Find a smaller town where there aren't already a bunch of flippers. Find the most in-demand neighborhoods with the best schools and direct market to owners there or find a wholesaler to do it for you.

    Another option for you would be Florida if you like vacationing down there. You could start some flips there and write off the travel.

    Once you identify a good area I think your best bet is to identify a contractor and partner with him on a deal.  Getting good contractors is the hardest part of flipping.

    0Reply
  • Shiv Choythani
    New York City, NY · Member since 2016 · 41 posts · 10 votes
    9y
    Good evening Eric P. And James Ritter I am also in the NYC area looking to invest as well, willing to listen to any investment opportunities that may be available and of interest.
    0Reply
  • James Ritter
    Glen Cove, NY · Member since 2015 · 110 posts · 18 votes
    9y

    Hi @Shiv Choythani and @Eric P. maybe we can all partner on something. I have a brother in law in the business (not on speaking terms) that make a killing on Brooklyn rehabs. I have lots of ideas on getting properties and have had custom programs built to get marketing lists. Shoot me a PM and lets talk.

    0Reply
  • John DeVito
    Investor · Campbell Hall, NY · Member since 2016 · 30 posts · 10 votes
    9y

    Eric!  I'm in Orange County NY. You can easily do a fix and flip in my area for 150k. 

    That's pretty much the sweet spot here. 60-80k for the property needing about 40-50 in rehab plus taxes and closing. ARV would come up around 230k. I usually use 65% of the retail for the numbers to work. Check Orange County. Message me if you want to chat.

    0Reply
  • John DeVito
    Investor · Campbell Hall, NY · Member since 2016 · 30 posts · 10 votes
    9y

    John Ritter!  Shoot me a message if you want to chat. My area is prime for that amount. 

    0Reply
  • Valerie Hiscoe
    Investor · Richmond, BC · Member since 2013 · 316 posts · 133 votes
    9y

    I've heard that buying under $75k is good to go cash but over $100k, better to go through a lender.  What do you guys think?  I'll have $25k cash and the same in credit cards available and was looking at Trenton, NJ.  Any feedback? Opinions? I know it would be harder to get a worthwhile spread with the lending costs - for hard money anyway - but where do you draw the line in the sand? A minimum profit amount or....?

    0Reply
  • Eric P.
    OP
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    9y

    honestly i think it's always better to go all cash. That way if the rehab takes a little longer or if selling takes a little longer, your profits aren't eroding (not to mention the added stress!) bc of the high interest rate hard money pymts you'd have to keep making

    0Reply
  • Stephen Chatto
    Rental Property Investor · Yardley, PA · Member since 2012 · 436 posts · 198 votes
    9y
    Originally posted by @Valerie Hiscoe:

    I've heard that buying under $75k is good to go cash but over $100k, better to go through a lender.  What do you guys think?  I'll have $25k cash and the same in credit cards available and was looking at Trenton, NJ.  Any feedback? Opinions? I know it would be harder to get a worthwhile spread with the lending costs - for hard money anyway - but where do you draw the line in the sand? A minimum profit amount or....?

     Valerie, 

    I do a lot of deals in Trenton.   I do I lot of Buy, Fix, Rent and sell Turnkey  That Way I am making money every month while waiting to sell, and at the same time my portfolio is growing!  Fell free to reach out to me with any questions you have about the Trenton market.

    Thanks, 

    Stephen Chatto

    0Reply
  • Eric P.
    OP
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    9y

    Oof. I thought you could use a 1031 exchange to prevent paying taxes on flips by using the profits from one deal to fund the next deal. I just learned that isn't the case - in fact, taxes on flips eat into a large part of the profit. This kind of makes me no longer want to do some flips on the side of my full-time job. Ultimately it sounds like a whole lotta effort and stress and headaches for very little post-tax profits. I think I'll just stick to buy and hold real estate. Am I misunderstanding something here?

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    @Eric P., Oof is right!  Flips do not qualify for 1031 because your intent when you buy the property is primarily to resell.  If your intent is primarily to hold for productive use then you can use the 1031.  It's not as simple as a fixed holding period.  There is no statutory holding period.  Certainly the longer the better.  Most conservative folks would say more than a year but there can always be circumstances where less may be acceptable or more required.

    You're absolutely right about the enormous tax bill generated by ordinary income coupled with self-employment tax, and HCA surcharge.  The answer is to change your model slightly from a fix n flip model to a fix n rent n evaluate model.  Now  you lessen your tax burden whether or not you 1031. You potentially completely mitigate taxes altogether using the 1031.  And you generate the significant tax deductions and cash flow that allow you to ratchet your investing almost as quickly as the work intensive flip model.  Let the tenants pay the bills for a while.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    4Reply
  • Eric P.
    OP
    New York City, NY · Member since 2016 · 470 posts · 348 votes
    9y

    @Dave Foster Awesome! This is basically BRRRR, right? Also I'm jealous you live in St Pete - love it there!

    0Reply
  • Account Closed
    New Jersey, NJ · Member since 2015 · 327 posts · 137 votes
    9y
    Eric P. You and me both that NYC has become a no investor zone unless you have $500k to play with. If you have your team ready and that amount of capital on stand by, NYC neighbors NJ has many properties to start with. I just purchase a property in Newark for under $40k 2 family distress condition. As a contractor it's an easy gut/renovation then off to section 8 rental. NJ market has not recover fully like NYC so I suggest you take advantage of it.
    0Reply
  • Ray Reed
    Investor · Linden, NJ · Member since 2016 · 190 posts · 116 votes
    9y

    @Account Closed i think the NJ market has corrected itself.  The taxes are high and the rents are lower than NYC so you still have a challenge finding a house where the numbers work.  Newark has a lot of cheap houses but a lot of investors would stay away from some of those areas. 

    0Reply
  • Account Closed
    New Jersey, NJ · Member since 2015 · 327 posts · 137 votes
    9y
    Ray Reed property tax can disturb cash flow but should not be the base of not purchasing a property as a rental. Lucky for me as a USMC veteran I get some tax exempt/credit from both NJ state and NY.
    0Reply
  • Israel Ramirez
    Wholesaler · Phoenix, AZ · Member since 2016 · 33 posts · 10 votes
    9y
    You might want to research cities that you can afford to flip in with your budget! Good luck!
    0Reply
  • Valerie Hiscoe
    Investor · Richmond, BC · Member since 2013 · 316 posts · 133 votes
    9y

    @Israel Ramirez

    Did you have a suggestion about what cities? Or the best ways to find those cities? Or how to tell if they're good cities to flip in? Could you be more specific. I believe Eric started the post asking for suggestions on cities he could afford to flip in, if I'm not mistaken. 

    2Reply
  • Omar Ismael
    Agent / Investor · Newark, NJ · Member since 2015 · 95 posts · 60 votes
    9y

    Congrats on your purchase William P. I am also investing in Newatk nj , Pm me if u wanna know more about the area 

    0Reply
  • Account Closed
    New Jersey, NJ · Member since 2015 · 327 posts · 137 votes
    9y
    Thanks Omar Ismael
    0Reply
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