I just joined this TLC forum so I apologize if this subject has already been covered. Is there any place where we can find out what people REALLY make on their flips, considering ALL costs, including brokerage fees, loan origination fees, interest, title policy, permits, taxes, HOA fees and all the other traditional closing costs on both the acquisition and disposition of the property. Also, are there some flippers who were never able to actually sell their houses, and what did they do with it?

I wish there was a place to find out that info too. I think it would be interesting to find out if these people ever do another flip and how that turns out too. Maybe over time they get better and more knowledgeable about it. Or maybe not!

You can't find ou their costs. But you can go to the county court house that keeps a record of all deed transactions. So if you know of a flip going on in your area. You can get the purchass price pre flipp as well as the sold price after flipp. I have done many flips, for myslef and others. In a hot neighborhood you can make 30-40% of the pref lipp price. Slower areas you can't expect to make more then 20%
( after your invested costs ) If you buy it for 102K put in 10K then sell it for 139K. You never want to invest more then 10-15% of the cost of the property on small flips.

Don't forget the taxman. He gets 38% - 42% of every dollar on your net income of the flipp.
( depending on what state you live in ) So if you net 20K after the payables are satisfyed. The taxman gets 7,600.00 - 8,400.oo. That leaves you with 12,400.00 - 11,600.00 cash. Most people don't understand the taxes part of it.

So why don't they give this info on the show? If this is supposed to be a show to teach people how to flip you need to take into account all the costs. Closing costs alone assuming you use a real estate agent @ 6% are going to be be close to 7-8% of the selling price. On many of these flips that would eat up most if not all the profits they estimate.

jcg61

I thought that if you take your profit from one flip and put it into another flip right away you don't need to pay capital gain taxes. Could someone with credentials tell me if this is true?

If you do a 1030 exchange you can defer capital gain taxes.

jcg61

My original post should have said 1031 exchange. Sorry for the typo.

jcg61

quote:

Originally posted by jcg61:
If you do a 1030 exchange you can defer capital gain taxes.

jcg61

I am pretty sure the 1031exchange is a thing of the past.I have been looking for ways around giving the tax guy half of the profits for doing nothing. If anyone has figured out a way please let us know.

I have yet to see uncle sam at one of my job sites at 7am or 10pm yet he gets 40% of the net! Would love to learn how to legally roll or keep more of the profits.

1031 exchanges are very much alive and well. Search Google and find more detailed info.

quote:

Originally posted by gipflip:
I am pretty sure the 1031exchange is a thing of the past.I have been looking for ways around giving the tax guy half of the profits for doing nothing. If anyone has figured out a way please let us know.

Hold property for at least one year to drop capital gains tax from short term to long term then do a 1031 to purchase new property and DEFER ALL tax.

quote:

Originally posted by dcs333:
I have yet to see uncle sam at one of my job sites at 7am or 10pm yet he gets 40% of the net! Would love to learn how to legally roll or keep more of the profits.

Tax sale property: In the state that I live in, you have to wait a year to take over the property if the owners don't pay the taxes on the property. Is it the same for other states?

You can definately still do a 1031 exchange. The standard way to never really pay and taxes is to buy property, sell via 1031 exchange as buy bigger/more expensive property. As time goes on and your property increases in value you refinance to take money out. You can do this till you die, and never pay a penny in taxes. This is the method very wealthy families use that own extremely expensive properties, and just continue to keep them in the family (generation after generation).

jcg61

quote:

Originally posted by gipflip:
I am pretty sure the 1031exchange is a thing of the past.I have been looking for ways around giving the tax guy half of the profits for doing nothing. If anyone has figured out a way please let us know.

If you can't find info searching for "1031 Exchange", try Starker Exchange.

The 1031 exchange is a powerful tool for deferring capital gains taxes. There are specific rules however, such as timeframe, where the money (profit from the previous sale) is held in trust, type of property you can roll it into, etc. Also keep in mind that evenually, as you continue to use the 1031 exchange, your basis in the next property is reduced, thus causing more cap gains should you not us the 1031 on the next property and sell it outright. There are other ways to get cash out of a property and not pay taxes, however you must retain the property in your portfolio and tax a mortgage or other financing. Consult a good CPA.

1031 is great, but the time you have to WAIT to sell for some tax deferrment schemes is time you are making PAYMENTS on the loan (the interest on which may also be deductible, of course) so there's a balance there. But this is really a discussion about taxes on a NET income, so it is all the more reason, if you're going to be flipping on a regular basis, to not only get a VERY good system going to keep track of ALL expenses but also, perhaps, to incorporate in a low-tax or no-tax state, etc. etc. I see flippers who shell out pocket cash for the "ooops, we need a bolt--go to Home Depot!" kind of thing, and y'know what? All that "little stuff" adds up to HUNDRED or THOUSANDS that, if you kept receipts and were systematic about it, would help defer some tax profits, too.

THEN, there's an issue of whether you can pay yourself for your sweat equity labor, especially in the cleanup and demo stages of things. It may only be one pocket to the other, but it may help tax-wise, especially if you're working via a personal corp where you can write off your corporate losses against your "job-job" income---and TIMING is important. If you expense in ONE tax year and profit in the NEXT, there can be advantages, too.

Bottomline? GEt a good CPA, keep accurate and detailed records and receipts, and then just plain give up to some degree and accept taxes as a fact of life. BUT....vote smart when it comes to choosing the pols who raise your taxes vs. those who limit them. Its amazing how people who have always worked at a job and had withholding "invisibly" removed from their income and never given a thought to such political issues re. taxation SUDDENLY get "religion" on the subject when their new entrepreneurial venture wakes them up.