Rental Property Investor · Baltimore, MD · Member since 2020 · 54 posts · 19 votes
For my first flip i was thinking of getting an llc then opening up an account to get business credit. Then using the business credit to put down on a flip and have the hard money lender cover the rest. Then after the flip i pay the expenses back then pay my business credit card back and 1031 exchange…then rinse and repeat. Is this a good strategy?
Investor · Tel Aviv, Israel · Member since 2019 · 85 posts · 36 votes
5y
it's really a general thing what you are saying here. You basically cannot 1031 a property if you own it less than a year, unless you rented it out and then you need an exception to accept 1031 before 1 year.
After 1 year, regardless of the status, you can do 1031.
I would suggest you learn about credit, lending for flipping, flipping itself...
Lenders don't look at Business credit, they look at your personal credit. if you have low credit, the recommendation is to increase it but not mandatory. You can start investing without even credit at all, you just have to bring more to the table.
After increasing your credit, score, forming LLC, opening a business bank account, start searching for your first flip.
Find something that is not a big rehab, start with a small-medium rehab, earn a little money and then after your experience, go and take a bigger project.
Developer · Maplewood, NJ · Member since 2019 · 56 posts · 30 votes
5y
Most important thing is to find a mentor or experience to partner with for your first flip. You will learn so much and greatly increase your chances of success. Flipping with no experience is very difficult and you will make many costly mistakes. 1031 isn't for flipping and there is no way you can fund a flip with a biz or credit card as you need to write many checks for labor. You will need mostly cash for the rehab expenses.
Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
5y
I have been flipping for years and what a lot of people don´t understand that it´s complicated with thousands of ways to lose. Your initial posts sounds fine but please don´t go into it with a simplistic approach or mindset. There are tons of things to consider and things have to be right for it to work right. These are the things that are not explained on HGTV or the youtube stuff.
Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes
5y
Tyana,
A couple of things from the insurance perspective:
1. You need liability coverage for yourself or the LLC whichever way you own the property. By all means require and verify that the contractors on project have General Liability and Workers Comp. If you have to use any professionals (architect, engineer, asbestos contractor, etc.) make sure they have professional liability
2. If you are acting as your own GC, you should also consider a minimum workers Comp. (WC) policy. Your agent can advise on the Workers comp laws and likelihood of being brought into a WC suit.
3. If you are flipping the property, the normal form for the property coverage is a Renovation Builders Risk. Depending on the situation it could be different but make sure the agent & company are aware of the renovation if they cover it on a different type of policy.