All Forum Posts by: Kyle B.

A quick summary of the situation I am in (I apologize in advance for the long post). I own a property that I am in the process of flipping. The property does not have the real estate tax exemption, so the 2012 taxes (most recent year) are about twice as much as tax exempt properties, many of which are comps for mine. My realtor says this can be a major issue in selling the property. Even though the end buyer will not ultimately pay the non-exempt total, if I don't sell the property by the end of the year (which marks the filing deadline for getting the exemption), the end buyer will have to escrow taxes based on the higher tax level. According to my realtor, this will significantly decrease the interest in the property since in theory, a buyer could buy a more expensive house for the same monthly payment, since they would have to pay more in taxes (just for the first year until they get reimbursed) if they purchase my property.

Has anyone else been in this situation? What is the best way to approach this - do I just have to bite the bullet and hope someone buys the property despite this issue or is there a more active approach I can take? My best case scenario is I close on the property before the year end, but I want to plan in the event this doesn't happen. I realize I can move into the property and file for the exemption but that's really not something I want to be forced into doing.

Thanks, Kyle

@Lauren Lucas , welcome to BP. I actually grew up in Crete and my parents still live there. I'm in Chicago now, but make it back to that area all the time.

I am a newbie as well. I got started in real estate earlier this year and am working on my first rehab now. What really got me going was actually getting connected with people who were successful at real estate. I would recommend you search your network of family and friends for any connection with someone who is doing what you want to do - essentially someone who you can bounce questions and ideas off of.

As for your questions about schooling, I would say it is not essential in terms of gaining knowledge about real estate. But think of it in a different way. A college degree will increase your earnings potenital, which will allow you to invest more of your excess income in real estate. Having captial to begin with is a huge advantage, and having a college degree will help with this (while being careful not to pile on too much student debt).

Hope this helps.

@Jessica H. , wow congrats on those deals. On paper, those numbers appear crazy good. Did you purchase those off the MLS or through different means?

@Ahmed Napier , for homes under $100k, many people want more of a cushion since your targeted profit will be smaller in absolute dollars. I've seen people say to adjust the formula down to 65% of ARV. It would be to your benefit to do a search for "70% rule" on this site. There have been a large amount of forums that have discussed this topic, with some great insight to be had.

You need to look at comparable sales. So sales of similar style/size homes that have sold within a recent time period. If you are trying to determine the resale value of a home that is outdated and needs updating, then you need to find comps for a similarly outdated home. The same goes for a home that is fully updated - compare the sales of other updated homes.

Keep in mind, it is an art and not a science.

@Ahmed Napier, the value shown on an MLS listing is the asking price. Depending on how many repairs are needed on the home, this can vary greatly from what the ARV (after repair value = an estimation of what the home could sell for if all repairs and updates are made). Hope this helps.

I am close to closing on a property which I plan on rehabbing and flipping so I've been lining up my insurance. Since I plan on having improvements made to the property, my agent says I will need a builders' risk policy. With this policy however, I can not get liability coverage for any injuries that may occur at the property. My agent said that I could get commercial coverage, which would cover me for any liabilities. What type of insurance do rehabbers typically get for their properties so they're fully covered. Also, I am purchasing the property in an LLC. Thanks.

Jenkins Ramon, that's a good point. I wonder if you can filter to remove accounts that haven't posted in the past year or so. Waiting for Joshua Dorkin to get looped into the forum to see if any of this is possible.

This is an interesting question. My guess it would be California, but that's no surpise given the population of the state. Even more interesting I think would be the state with the most members as a ratio of their overall population. I wonder if that would give any insight into how "hot" a real estate market is. Would probably take a fair bit of number crunching to calculate though.

John Sandcastle, I agree with Jon Holdman, 15-20% on an annualized basis is more in line for a realistic return. If you are looking to get that return in a three month time span, you will need to hold an equity stake in the deal (higher returns for more risk). However, it will be harder to negotiate a deal like this if your long-term strategy is to rent as there will be no large profit payoff at the end of three months as there would be if you were flipping it to a retail buyer (or landlord). If your goal is to get this return in that short a time span, you may need to revise your strategy for this deal.