All Forum Posts by: Will Barnard

This is your best advice. Convince him that leaving $200k on the table is not worth any headaches of listing with a broker and several people coming through the home. If this was a full fixer, i would say otherwise.

Looks like you may have found a nice niche in your market. Start talking to potential buyers and get a buyers list going with their criterias. Then go find the dated deal that fits that criteria, fix it and flip to them. You also have the commissions paycheck too so you are generating multiple income streams from this niche.

If you post the details of the financial situation like how much work is remaining, what the sold price expectation is, how much you have into the deal so far, what your current loans are, etc. we can better answer your question. It rarely makes financial sense to sell before completion as you lose most or all of your previous efforts so completing it should be your goal unless you will be putting in more to lose more in which case, cut your losses now.

Borrowing from friend/family, borrow from private investor, line of credit, HELOC, sell any asset you have, credit cards, terms with suppliers and service providers to be paid once it sells, etc. can all be means to get you to completion. Perhaps asking your current creditor for an additional sum to be released upon completion of each task needed.

The old standard of 6% was widely used throughout the US for years. In recent years, that standard has come down to 5% (at least here in Southern CA). Keep in mind your average 1500sf 3 bed 2 bath that sells for $200k in most states sells for $750K+ here so selling the same house (but different location) has the agent making triple for the exact same work and almost same expenses (our gas and perhaps photo shoots may cost more here in CA then elsewhere).

Now, I see a lot of listings from big brokerages with agents showing 2% per side, 2.25% per side so the 5% is getting squeezed down. We can debate why all day but the fact that these %'s are coming down as price points climb and climb and more technology and ibuyers come to market holds true.

Commissions are negotiable along with just about everything else so it really comes down to what makes sense for both parties involved.

Happy to help. Congrats on getting started here on BP. Stay active and continue to engage the community, it will be well worth your time and efforts in the long run.

This is a viable and fantastic option. It would save both of them from unnecessary transfer taxes. Hopefully they are cooperative with each other in this situation which will make all of your lives easier during the transition.

Without knowing the size of the wall or full details of the demo plan (like if it is load bearing and needs shoring or not), hard to say, but you are missing some factor here. Taking your $2500 quote and using 4 labor guys 1 day for a total of 32 man hours to arrive at your $80 per hour ($78.13 per hour actually), you failed to factor the cost of the dumpster rental and subsequent dump fees. On top of that, the contractor (assuming he is licensed) has overhead like liability insurance, gas and auto expenses, office expenses, workers comp insurance, employee benefits, matching taxes on employee incomes, etc. Then the contractor also has to make a profit too. Add that all up and $2500 does not seem far fetched, but it certainly may be possible to get it done for less. Your 3 bids will help answer this question, just make sure (as others pointed out) that the 3 competing bids are apples to apples).

 LOL!! I was right here all along Bruce, ha ha. I would point out that there is a big difference between a owner occupied client to contractor relationship as opposed to an investor/flipper one. The investor has a clock ticking on costs whereas in the case of the homeowner client, they only want the speed out of convenience to "bring their toothbrush" moreover than worrying about holding costs so this penalty/bonus works much better with flipper clients.

Where were you when I needed a good contractor Bruce?!

Sounds like you need to have a conversation with your CPA (and perhaps RE attorney) to discuss your options. You could quit claim to your personal name and then cash out refi into a loan, transferring your insurance policy to your personal name (which will be a lower policy premium for owner occupants). Speak to your CPA regarding how to close out the LLC (unless you intend to use it to buy additional properties to hold).

The 70% rule is NOT a rule, but a guideline for a "back of the napkin" calculation. It is not something you base your investment decisions on solely. The price point plays a large role in how you may need to adjust this guideline. When you work in price points under $200k, you may need to be closer to 65% and deals over $300k can easily be profitable flips with 75% or even 80% depending on the details of that particular transaction. Light rehabs with lower holding periods can work at higher all-in %'s since your exposure to risk (via timeline) is reduced and your holding costs are reduced on quicker flips where conversely, you may need more room for a full gut to the studs rehab as your timeline of holding period will be much larger (as well as your risk factors).

 In today's seller's market, it is considered by many a home run to find a 70% flip deal in your price point. As your primary residence, so long as you live in it for 2 of the previous 5 years you own it, you get a $250k tax exclusion on any profits ($500k for married couples filing jointly) earned on the sale. As far as 1031 goes, you cannot qualify for a 1031 on flips unless your "intent" was to hold and you did so for at least 1 year, then you may qualify for a 1031 (but never on your primary residence).

The question to flip it or hold it can only be answered by you after doing a side by side comparison of the two transactions and the net result of each with your CPA. You could have tax exposure and what you do with the profits can determine your answer.

Your other option is to hold it and once you have the equity built up, you can cash out refi. The loan proceeds are tax free and you can use them to buy another. Rinse and repeat.