i want to get into the buying fixer upper houses and flipping them over for profit any advice anyone can give?

Question

what shoud i do to start in this business? should i incorporate my business for legal issues. what about handymen i don't want to do
much on the operation side as i have work and can not attend to everything. what about the financial side to obtain tax shelter.
any advice from anyone is very much appreciated

Answer 1

As indicated, you've got a LOT to learn before you make this leap. However, here's the basic formula that's served thousands of rehab investors well. Never, never, never (did I mention, never?) pay more than 70% of Full Market Value (as determined by comps, not list prices) MINUS any needed repairs to reach your Maximum Allowable Offer (MAO).

Got it?

FMV X .70 - repairs = MAO

And you never want to pay MAO if possible. Learn to negotiate. Especially if you're not doing the work yourself!
Learn it, know it, live it. If you stray from this formula, you're going to a seminar...at the school of HARD KNOCKS!

There's a ton of books/cd's/dvd's out there from every real estate "GURU" on the planet. Ron LeGrand's stuff is a very good intro into the business but for a free forum FULL of good information join The Creative Investor forums at www.thecreativeinvestor.com

Please keep in mind that HGTV makes it look easy. And what they skip over is the most important part....You don't make money in Real Estate when you sell, you make it when you buy!

HTH

Addition: I looked back at this post and realized it sounded sort of negative. That was not my intention. If you're serious about doing this, get yourself educated on the subject and go for it. If I'd listened to all the naysayers I'd never have even gotten started.

Answer 2

I also don't think you are prepared to flip houses. There is a ton of work involved, and those people on the TV shows make it look easy, it isn't. If you cannot attend to everything, you are not in a position to chase contractors around, check to make sure they are on the job site, and are doing things to your satisfaction. There are no tax shelters for this.

Unless you have some tried and true, very trusted contractors to help you start this venture, you don't have the infrastructure to get this off the ground. The biggest complaint I here from flippers are dealing with contractors, they are notoriously unreliable.

If you don't have the hands on construction background, how are you going to select properties?

Do you have knowledge of the RE market to know which types of houses will sell and how many will sit for many DOM while you pay the mortgage?

This is not easy, and there are alot of factors that need a hands on approach, and if you are not in a position to handle the operations side, you are not in a position to flip.

Answer 3

Sounds to me like you're FAR from ready to start into such a venture. First off, there are NO tax shelters on such ventures. This is a profit maker, and you can expect to pay the tax man like you would on any other similar venture.

You don't want to 'tend to everything' ? You're simply going to trust an assortment of contractors to do what they think is correct.?

Are you prepared to finance this entire venture ? Do you have about $50K in cash sitting around which you are not afraid to lose, in the event that one or more of these 'flips' does not turn out the way you think it will ?

Do you have a solid knowledge of the real estate market in your area, so that you do not pay too much, invest too much in a fix up, and then discover that the sale value will be less than you have invested ?

Time for you to take a breather and carefully analyze what you intend to do here. It's nowhere as easy as the TV informercials make it sound.

Answer 4

I know that the first thing is to be very proficient in searching county records concerning your proposed purchases. This is not a tax shelter type operation, because, done correctly, you should make 30% to 100% a year (30% on invested capital on a 4 mo. turnaround). You have to have a source on handymen and a knowledge of real estate agents who can move these for you. Set a limit on how much you will spend and know how to spend it. Incorporation would seem to me like a good idea, but the legal eagles say not necessary.

Answer 5

You need a minimum of 25% down for a commercial loan plus another 30k to 50k to make the upgrades. You buy the worse house in the Best Neighborhood. Make sure the foundation is sound, roof is good and only cosmetic upgrades are needed. You do all the labor yourself and you must complete the overhaul in 12 to 16 weeks at the most. You need to go with Hard Wood Floors, Granite counter tops and a Master Bath with Walk in closets. Anything less and you lose money.

Answer 6

Flipping real estate is as old as the 2nd house ever build, so everything you ever wanted to do, know and learn is already done and documented.

Your first start should be to learn everything you need to learn about a very very very challenging, and interesting business.

Next is to surround your self with all the experts that you may need to advise you, to work with you and to mentor you towards your objectives.

then once you have build your team, determine what area of real estate to focuss you attention on, and chart a course to follow and look for

having clear objectives is imparitive as with out clear direction and objectives, become a master and expert in your niche and stick to what you have become an expert in.

You saying you want to flip real estate is to vague, not a clear plan, within flipping there are at least 200 different methods and strategies to consider.

however do not worry about flipping until and unless you know your stuff, and filled in the rest with experts in your team.

Meet with them weekly to define a plan of action, define a win win win approach for you the sellers of your properties, and the eventual buyers, and off course your team needs to benefit as well, otherwise why would they become part of this venture.

As far as a tax shelter, the properties you keep will have decent ability to shelter some taxes.

Flipping is far from a quick rich business, and requires very good planning and organization, because wasting time is your biggest problem.

You can make money not being actively involved in the work, but it will require extreme control and supervision on all operational aspects of the business.

As mentioned flipping is a very old method to make money in real estate, there is much knowledge and expertise available on the topic, study the masters, and copy them for the biggest likelyhood of success.

Good Luck.

Answer 7

You have to do the work to make real money or at least know how to do the work if you are contracting it out. I would first find a team of good workers, carpenter, electrical and general labor maybe cement contractor. Then start with a small project to test your team. Learn all you can about real estate, most of your profit will be from not buying problems you didn't know about and being good at estimating prices of the buying and selling and what work will cost. Until you can look at a house and estimate what the problems will be and the cost to fix them you aren't ready.
You can start with a home you are living in working nights and weekends to make it nice then sell it.
Make sure all your contractors are licensed and bonded. Make sure they have workers comp and don't pay them until they prove all materials are paid for so you don't get mechanic liens on your homes. There won't be tax shelter it is all straight profit for taxes. If you are working on your own home the first 250K of profit is tax free if you live there 2 out of 5 years.
Make sure you have at least 50-100K available so you don't get foreclosed on just before you can sell or run out of money to cover expenses.