All Forum Posts by: Chris Kendrick
Chris Kendrick has started 32 posts and replied 191 times.
Quote from @Ashish Acharya:
Quote from @Randall Alan:
If you flip a house within a year of buying it, you pay your regular income tax rate on the income (ie. it gets added to whatever you made that year). If you hold the house for at least a year, you pay capital gains taxes on it, which are either 0, 15, or 20% - depending on your tax bracket (see below)
But one thing to remember is that all the expenses get deducted from your flip...including purchase and sales expenses, real estate taxes, etc. You only get taxed on the actual profit after all expenses. One other thing though... if you had your property for several years and depreciated the property along the way, the government makes you "recapture" that depreciation - which basically means you have to subtract any previous depreciation off the basis of your house and pay tax on that portion you already depreciated.
In short, it takes a really good spread between your purchase / repair expenses and your ARV to make a flip work. Personally, we won't take on a flip unless we think we can net about $50,000 after all expenses - including taxes. I'm sure others might go lower than that... but for the time, effort, and risk - including going over budget - we want that much cushion to make sure we have a successful outcome. We have flipped about 5 homes in the past 5 years. We have come closer to making 6 figures on most all the flips we did - except our last one as the markets were starting to cool, and we had permit issues with it - that one was probably about $50,000 in the end.
These are the capital gains rates for 2023 (this is your gross income (including the flip profits - not just what you made on the flip):
| long-term capital gains rate | Taxable income |
|---|---|
| 0% | $0 to $44,625 |
| 15% | $44,626 to $492,300 |
| 20% | $492,301 or higher |
So unless you are somewhat destitute, you are looking at 15% capital gains with a median income, and 20% if you have a higher income.
All the best!
Randy
Randall, holding a flip for more than a year doesn't change the taxes and you cannot get capital gain treatment for flips.
So is he all wrong then, so the profits from flip is get capital gain taxed at 15 percent
So when you flip a house and make profit from it, you basically getting tax alot, like around 40 percent, is that correct? How are all these people flippers making money , i assume that there ARV is really good then to make good profit, but i original thought once you flip a house you could just put the profit you made from that into buying another property and not get taxed, but thats not right? You will always get tax, right?
So when you flip a house and make profit from it, you basically getting tax alot, like around 40 percent, is that correct? How are all these people flippers making money , i assume that there ARV is really good then to make good profit, but i original thought once you flip a house you could just put the profit you made from that into buying another property and not get taxed, but thats not right? You will always get tax, right?
Quote from @Eric Greenberg:
So you did a cash out refi to only get $5k cash back? Or is this a hypothetical?
The cash you receive from a cash out refi is not taxed.
Just an example, saying it was 5k or could be 10k. So not tax meaning i have to put that money in another property to avoid tax
Post: BRRR calculator help
- Posts 191
- Votes 21
Quote from @David Millot:
Most HELOC's require you make interest only payments on the amount you've used while you are in the draw period. So you have to account for that monthly interest only payment... you can call it holding costs or debt service, but either way that extra payment needs to be accounted for in your cashflow analysis.
Huh, yeah its interest only but what that matters ,if i use it on a rental property and refinance i will get all my money back and just pay that heloc off in a few months
When doing a brrrr method and when you go and do a cash out Refinance , and once you pay off on what you borrowed from wherever, if you had an extra $5k after all set and down, so is that 5k have to be put back into another property or you get capital gain tax on it or could u keep it in bank account, i guess you could leave it in the house you cash refi out
Post: BRRR calculator help
- Posts 191
- Votes 21
Quote from @Chris Orme:
New to this, and feel like I'm getting grasp of the BRRRR strategy.
However, in using the BRRRR calculator here, I am confused about something. When figuring holding costs, I feel like it doesn't take into account the interest on any money borrowed for rehabbing.
If when taking a loan to include the rehab costs, should I include that in the purchase price? Or, what am I missing?
Thank you!
Post: Where to buy
- Posts 191
- Votes 21
Just wondering what is everyone doing with the rehab on there properties, i know you get a contractor, but do you have to go shopping on what tile and flooring to use and fixtures to buy etc... or do you just tell the contractor what you want and they get it, and if you do go shopping for flooring or kitchen cabinets and bathroom stuff, do you guys go to lowes or home depot to get them??
Post: Rehab suppliers from stores
- Posts 191
- Votes 21
Just wondering what is everyone doing with the rehab on there properties, i know you get a contractor, but do you have to go shopping on what tile and flooring to use and fixtures to buy etc... or do you just tell the contractor what you want and they get it, and if you do go shopping for flooring or kitchen cabinets and bathroom stuff, do you guys go to lowes or home depot to get them??
Post: Help with finding a heloc for investment property
- Posts 191
- Votes 21
Quote from @Justin Donnarumma:
Quote from @Chris Kendrick:
Quote from @Justin Donnarumma:
If you find one, tell me. It is very hard to find a bank or credit union to lend. I did hear about one down the shore that would do it on a larger portfolio.
You can easily get on your primary. I'm talking about heloc on investment rentals. You can get those easy in NC? If so what are some names, may be they have them in jersey too.
Oh sorry, thought you talking about primary