Forms And Strategy
I am a new investor. I quit my job to put all my efforts in becoming a successful entrepreneur. To start having some income, I believe wholesaling / flipping is my best route. Eventually, I would like to buy and hold across the nation, but because of my current need for income, I thought flipping would be my best solution. Can anyone comment on this and share your experiences?
In addition, I received my broker license to gain more knowledge and I have purchased a library of forms from First Tuesday to get started. But can any advise me on which forms I should carry with me when approaching homeowners? Also what has been your best experience in contacting homeowners in CA?
Thank you for you help,
Getting Started in California
[ Edited by MastetteInvestor on Date 05/22/2006 ]
Keep in mind that taxes will eat up probably 50% +- of your profits if you flip. Since you will be buying and selling you will pay ordinary income taxes as well as self employment taxes on the increase in value. Add in state taxes and it gets pretty costly.
Hello Fellas,
Here in Ohio there are alot of ways to avoid paying the double tax rate. For starters if your just getting started then you may want to get Incorporated.. get an "S" corp and do not except any payment or any personal wages from your company this way they cant get you for personal income taxes. Learn to do everything in the companies name, for instance write of all your gas usage as a company expense. same thing with food and any other thing you may need to live, but be sure to be about your business and build your company strong. Try not to spend to much on yourself and not be able to show how it would be a business expense if your ever audited because they can still try to get you for Capital Gain. A way to avoid this is to put what ever profits you make from Real Estate back into Real Estate.
Mr. Cartier [ Edited by 5MILLIONMORE on Date 05/25/2006 ]
Quote:
On 2006-05-25 10:49, 5MILLIONMORE wrote:
Hello Fellas,
Here in Ohio there are alot of ways to avoid paying the double tax rate. For starters if your just getting started then you may want to get Incorporated.. get an "S" corp and do not except any payment or any personal wages from your company this way they cant get you for personal income taxes. Learn to do everything in the companies name, for instance write of all your gas usage as a company expense. same thing with food and any other thing you may need to live, but be sure to be about your business and build your company strong. Try not to spend to much on yourself and not be able to show how it would be a business expense if your ever audited because they can still try to get you for Capital Gain. A way to avoid this is to put what ever profits you make from Real Estate back into Real Estate.
<font size=-1>[ Edited by 5MILLIONMORE on Date 05/25/2006 ]</font>
Good points, but using his strategy of buying , fixing and selling, he will still pay taxes at ordinary income tax rates even if he uses an S Corp. structure.
The points about writing off your gas are the same whether in a company or not - you have to keep records of mileage and you can only write off the business portion.
Hello Finniganps,
Please explain more so that I may better understand.
Mr. Cartier
You are both VERY correct and it is frustrating. I just lost a bid to an owner occupant. The same property sold 7 motnhs ago to an owner occupant, its back on the market only 7 months later T R A S H E D!!! They get these properties and dont care about them and trash them....
I just joined realty trac Any other advice on buying property for an investment...like where do i go to find bargains...etc...
thank you Chris,,, what do you mean by 100 times below monthly rent or 80 times below. Is there some kind of qulifier i am unaware of.
The one house i am looking at is 89k it is bank owned and i will offer 75k the outstanding balance on the loan is 67k. If i get it, I will put 10% down and the mortgage will be 689 per month. 3 bedroom will bring me 950 around philly suburbs... one draw back..its oil heat and has the old radiators....if the tank is in the ground, i am walking...
Hey,
In the good ole days, you could figure out the rent for a house be dividing the house value by 100.
A $70,000 house would rent for $700. Or you could multiple the rent by 100, to get the purchase price. At 80, the same $700 rent would be worth $56k.
Sadly, in my area, this easy math no longer works.
House that sell for $140,000 can be rented for $900 (if you are lucky). That is what happens when interest rates went to nothing.
Bruce
This is an awesome board! thanks...
IS THERE ANY SPREADSHEET for calculations on investment properties. (profit loss, break even, how much fixup, is it worth it?) etc...
Just out of curiosity- why are you bidding above what is owed? I have several bank owned propeties and I always offer below what the current mortgage was. Gives them some room to negotiate with me. I always include an estimate of everything that needs repaired (even if I am not going to right away) and have gotten most properties around 50% of asking price. Sometimes it takes a few months of watching and waiting. If you are not embarrasssed to put in your offer-it is too high. (unless you are in a multiple bid session of course!) Good Luck!!
Quote:, what do you mean by 100 times below monthly rent or 80 times below.That 1% rule that Chris speaks of is only appropriate for properties priced below $100K. As a general rule, the percentage of market rent to price goes down above $100K. At $150K, look for monthly market rents to be more like 0.75% of value.
Quote:The one house i am looking at is 89k it is bank owned and i will offer 75k the outstanding balance on the loan is 67k. If the property is bank owned, there is no mortgage balance. The bank owns it free and clear.
ypochris-
Is this 133% rule for owner occupied investment property also?
Quote:
On 2006-05-24 20:15, ypochris wrote:
Do know that your rent has to be 133% of the PIMI payment, or lenders will consider you to be operating at a loss and your ability to purchase more properties will be compromised.
Chris
I assume you mean a multi unit that you occupy part of. The answer is yes; the rent you lose occupying part of the property is an expense that you will have to cover. What they want to see is cash flow to pay the PITI, vacancies, yard service, repairs and mantainance, etc. etc.
On a commercial (5 unit) deal I am trying to finance, a lender told me yesterday that they would want to see 120% AFTER deducting expected vacancies, utilities, R&M, and etc. But my understanding is that it is pretty standard for residential (4 units or less) that GSR equaling 133% of PITI is considered breaking even. Less than that and you have to have other income sources to make up the shortfall; thus the hit on your borrowing ability. More than that and it is considered profitable, increasing your ability to borrow.
Chris
Quote:
On 2006-05-24 12:33, tess wrote:
Just out of curiosity- why are you bidding above what is owed? I have several bank owned propeties and I always offer below what the current mortgage was. Gives them some room to negotiate with me. I always include an estimate of everything that needs repaired (even if I am not going to right away) and have gotten most properties around 50% of asking price. Sometimes it takes a few months of watching and waiting. If you are not embarrasssed to put in your offer-it is too high. (unless you are in a multiple bid session of course!) Good Luck!!
The bank has it up for $89900 im bidding $75000 I show a balance of 67k pn the loan, however i am not sure of that remaining balance...
Great job....
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Thanks, it is a buyers market in Lee county right now, plenty of negotiating power.
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Great stories, there really is no business like real estate.
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To my knowledge the person who bought from me just rehabbed and rented it out
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