All Forum Posts by: Stuart M.

What numbers does he take? ARV etc. I can definitely see doing 100 at 10% margin and making a boatload. But I cant do that volume unless someone wants to loan me a few mil at 0%.

PM me an address of one if you can. 

Thanks for the reply. My point was more on the margin end than getting into the nitty gritty. Do you purchase places for 70% ARV and expect to be into them for 83% ARV commonly? What is your limit? Will you go to 85% or 90% ARV all in?

It wasnt a homeowner flip, it was an LLC that does many, Im sure their own guys are doing all the work, but they arent getting the HO self paint discount and their guys are costing them 20/hr either way (cash/taxes) or theyre working for someone else. Im sure its cheapest materials and poor work allthe way around to cut costs but just adding up min hours + costs for goods, 21k seems unrealistic. The have a 2k+ countertop. 3.5k min AC. 3.5k+ windows, no labor. 1k cabinets. 1k doors, no labor. 1.5k appliances. 1.5k tile and thinset if no leveler, no labor. 1k dumpster. Say you have only 2 ninjas working 3 months. Thats 10k labor. (No contractor is doing ALL this for anywhere near that.) We are at 25k so far, on the cheap end! And sinks, vanities, toilets, tub, interior doors, hundreds of LF of trim, faucets, fixtures, caulk and paint, fix the yard and clean. You cant just find this stuff "free" laying around or pay guys half the market rate or expect one guy to do all this himself at double speed.

I would like to know where you cut costs here, maybe itll help me in the future. I guess labor must be half where you are?

Taxes are insane down here btw, we dont have an income tax, only RE taxes. So like 2%/yr, or 300/mo here.  Many wouldnt carry insurance on the flip cause its another 2.5k builders policy for 6 mo (cant fake it with HO policy, they all do inspections.)

It seems more likely theyre on tighter margins, 8-10%, and just do volume. 67 flips/yr at 15k profit is a million, 25% return on 4 mil invested w 4/mo average carry, 23 at a time. 

But like i said, competition is crazy down here. 

I was looking at comps for a property and stumbled upon a flip.  Same neighborhood, same house.

The other house was bought for 145k, 1248sqft single story on slab 3/2 with carport.  Installed all new tile throughout, remodel 2 bathrooms and a kitchen completely (new tile, tub, shower, appliances, cabinets, counters, etc) and new Dade impact windows (I count 12) and impact doors (3) and a new central AC unit.

Sold for 208k.

Say they accepted 20% as their margin, that means they did 2 new bathrooms and a new kitchen (appliances/granite) and all new floors and all new trim and all new paint (interior/exterior) and all new windows and doors and a new central AC unit and clean up exterior and permits and demo for 21k.  After 6% min sales cost, profit would be 28k on 166k invested, 5 months from close to close (2 months was waiting for offer.)

Seem legit?  Someone tell me how to remodel a house for 21k.  Or are we taking 10% return on our money? Where are the lenders accepting those numbers?

If you're aiming for 75% of ARV, that means the remodel must cost 11k. Considering they BOUGHT it for 70% of ARV.

That's the competition.

Oh, and the house I was looking at, they want 165k. Before all of the same remodeling.

I guess its harder going from normal business accounting to RE accounting. 

A concrete example. You decide to get into business buying/rehabbing/renting. You buy the first house, then go to home depot and buy a drill. You plan to use that drill on rehabbing every house you ever buy. 

Is the drill a startup cost for house 1, a general business expense, or added to house 1 basis?

Now you buy house 2. You decide you want a bigger drill. Same question. 

Im sorry if these questions are tedious but a normal business, a drill is an asset and you sec 179 it if under limit, so easy. 

I understand the mileage on personal vehicles for business use. But if you rent a F150 pickup truck from Hertz for a month because you need to pick up lumber, roofing materials, appliances, etc during work days from Home Depot, and you drive the truck home to sleep at night, my understanding is you cant expense "mileage" on a rental, so how do you expense the rental truck?

On your second rental house you buy, do you again have "startup costs" where the limit is 5k or do normal business expensing rules come into play?

Thank you again for doing this. 

I want to know if I have the basics right. 

Say you bought your first house to rent in 6/17 and you did all the work to it yourself, and you end up placing it in service in 1/18. My understanding is that in 2017 you expense any tools you bought, and any business expenses not related directly to your rental. For 2018, you determine your basis for your rental house to depreciate it over the next 27.5 years by taking the lesser of the completed current appraised value (adjusted by building:land ratio) OR the cost of purchase, plus mortgage interest, home insurance, PMI, RE taxes, utilities, new roof, electrical/plumbing, appliances, drywall and their labor cost, insulation, doors/paint/trim, lawn service, and tool rentals, basically EVERYTHING I've spent up to the in service point, adjusted by building:land ratio. 

I hope that is right. The one thing im unsure of, if you dont own a vehicle, and you rented a truck or car to solely drive from your personal residence to the rental house, go buy supplies etc, for the months you were working on it, can you immediately expense those costs (plus the tolls and gas) for 2017 or do you add them to the basis of the house you were working on? If it matters your spouse owns a vehicle but they need their car so you cant use it.

Why wont it let me @ you on an iphone?

Thank you for doing this btw. 

Another question I have, this is about casualty losses. Say you bought a house (first or second home) that had a bad roof. After the roof was removed but before the new one was put on, a tornado comes along and damages the inside of your house. Insurance refuses coverage because you removed roof so no reimbursement. How do you determine FMV of roofless house and FMV of roofless damaged house to calculate casualty loss (just prior and just after right?)

You also have to reduce loss by $100 and 10% of AGI, yes? This is for 2017 and prior. 

 If you rented and lived in a condo in 2016 and 2017, but owned a house 50 miles away that no on rented from you or stayed in, you just used it whenever you wanted, is the house you own considered your second home and can you itemize the mortgage interest, RE taxes?

 Well, he said $65 for full gut rehabs, $85 if you don't know the right people, so you guys are consistent.

For $50-$75/sf, what finishes are we talking about?  Floors, counters, windows, doors, etc?  Strictly builders grade/laminate?

 Well, I'm gonna bump this up to see if I could get some more information, this is the closest answer I've seen to my question so far.

If you bumped this up to 1800 sqft (make it a 4/2 basically) what's your personal guesstimate?

What kind of flooring(s) were you thinking for the kit/bath/br/lr when you estimate 80k/1200sqft? Is that tub in the master or a tile shower? What countertops in kitchen?  How much does HVAC run out there per drop, how many tons AC you thinking for 1200sqft?

I'm not using this for an estimate, more of a goal...