| Bank Foreclosures [Property Flipping/Wholesaling] |
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djgcorb
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Location: Oregon
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| Bank Foreclosures [Property Flipping/Wholesaling] |
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My brother wants to get started buying real estate that has been in foreclosure. While it's possible enough capital could be raised to get him into his first deal, I am looking for some web resources that could help give him advice to avoid pitfalls. I understand capital gains tax applies to buying, fixing up and selling property without establishing residency but that's about all I know.
Any thoughts or ideas?
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Thu Feb 19, 2004 4:22 am |
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John
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Sorry, I don't have any links but wanted to comment on the capital gains tax.
While it is true that capital gains tax will apply to the sale of the real estate, many people are under the misconception that this is a separate and distinct tax in addition to your income tax. This is not true. Capital gains tax is essentially the same as regular income tax with a few additional rules. But in no case is it in addition to regular income tax. It is really nothing to fear in this case.
Fair warning, however, there could be situations where this sort of activity would be deemed a business, and as such the tax aspects could change. It is definitely worth discussing this venture with a qualified advisor.
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Mon Mar 01, 2004 2:35 am |
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Jill
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Here are a couple of websites I found.
The pitfalls of real estate investment:
http://msnbc.msn.com/id/3072583/
ABC's of capital gains tax:
http://www.cato.org/pubs/pas/pa-242.html
I have owned a rental property for two years now (commercial, not residental) and so far it's been very good. I hear fewer bad things from people who have commercial property.
Good luck! Hope these help.
"If you can count your money, you don't have a billion dollars." - J. Paul Getty (1892 - 1976)
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Mon Mar 01, 2004 5:57 am |
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REI Houston
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Real estate investing is what I do full time. A good jumping off point is http://www.creonline.com/ and find a loacal real estate investing group. A good book is Flipping Properties by Bronchick and Dahlstrom for an intro into REI.
Don't let people like Carlton Sheets fool you. There is work, it is NOT over night, but the rewards are well worth it. Check out Dolf De Roos (https://secure.richdad.com/product.asp?id=E171 as to why and a little on how to get into real estate.
Jerel
"Great spirits have always encountered violent opposition from mediocre minds." Albert Einstein
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Tue Mar 16, 2004 9:04 pm |
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Andrew
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REI Houston,
What's the scoop on flipping properties? I've heard about it, but haven't looked into it yet...
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Thu Mar 25, 2004 4:15 am |
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REI Houston
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The basic principle is to find a motivated seller, get them to sign a contract for sell of their property below market, and assign the contract to another investor for a "flipping fee."
For example, I am working with a lady who owns a house who's average retail value (ARV) is $145K. It needs some work (less than $10K - wholesell price/$20-30K retail) and she is tired of being a landlord to her relatives. My partner and I got it under contract for $115K with a $5K carpet allowance that she pays to the buyer at close. We turn around and sell the contract to an investor for $3K and 1/2 the carpet allowance for a total of $5500, the investor gets a check from the seller for $5000 at close, so the buyer ends up spending a net -$500 for a house with about $25K equity. And there are no real estate agents (or their commissions) involved. This is a little high for a flipping fee, but it is still a win-win situation.
Further, the investor can lease-option the house to someone for a year for $165K. That means the persons who move into the house sign a lease agreement with the option to buy the house for, in this case, $165K within one year. Additionally, the owner asks for 10% down ($16K). Most won't be able to come up with that much...maybe $5-10K, so the ballance gets tacked onto the normal rent. This neighborhood and house can rent normally for $1300-1500/mo, but could lease-option for $1500-1800/mo. Also, with lease-options, there are no midnight toilets to fix because the tenants agree to be responsible for all repairs.
That is a quick example of flipping and lease-options. For any situation, there are literally thousands of ways of making a boarderline deal into a good to great deal.
Jerel
"Great spirits have always encountered violent opposition from mediocre minds." Albert Einstein
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Mon Mar 29, 2004 5:27 pm |
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Andrew
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Thanks for sharing that information Jerel.
I need to spend some time with that website you posted earlier, and maybe check out that book. Real estate seems like the place to make big bucks, although the bigger pricetags make it seem less accessable. Perhaps that isn't really true if you know what you are doing. How much money do you need available to be able to really play in the real estate game like you are doing. Or am I just thinking about it the wrong way, since I'm somewhat ignorant of the tricks of the trade ?
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Wed Mar 31, 2004 7:45 pm |
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REI Houston
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Wholeselling is how most start who don't have a lot of capital. I usually get around $3k to assign (flip) a contract to another investor. You also get to build a list of contacts in different aspects of the game (financiers, other investors, bird dogs, contractors, RE management, etc.).
It's not hard, but it's the numbers that usually get most people. To get 1 deal, you have to "look" at around 100 properties - to see if there is anything there, about 10-15 min per. Out of that 100, you will get to around 20 that might have something to it - about 1/2 to 1 hour per. This involves talking to people, getting info on their situation, condition of house, and finding out how motivated the people are. From that, you might make an offer on around 5. In the end, negotiations will collaps at some point, and you end up with 1, maybe 2, deals.
The situation I described in my last post started the last week of January and won't close until May sometime. That is a little unusual, but not unheard of. My total time to date: about 12 hours (I took my time with it).
For those of looking to get into this business, check out a local real estate investment club for face-to-face contacts. I'm not set up to mentor long distance, but if anyone is in the Houston area, I'd be willing to talk more.
Jerel
jehlert@houston.rr.com
"Great spirits have always encountered violent opposition from mediocre minds." Albert Einstein
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Mon Apr 05, 2004 2:38 am |
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Andrew
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Very interesting, you can take advantage of the larger cuts available in real estate without needing the big bucks to operate. I guess it pays pretty well overall, but it can take a while to reach the payout point. Does the seller realize that you are not utimately the buyer? From their viewpoint are you the buyer, or an agent for the buyer?
(P.S. Check your messages, Jerel.)
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Mon Apr 05, 2004 5:35 pm |
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TrustLender
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| www.LandTrust.net |
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DJG:
Check out:
http://LandTrust.net/
Once there go to the discussion forum.
It contains lots of good FREE STUFF to help you get into Creative REI without risk or use of Credit Checks, Downpayments, Landlord Hassles, Bank Qualifying and not even having to get an expensive new bank loan!!!
Happy Investing!
Derrick
Offers Free Training Classes for Real Estate Investors
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Fri Apr 16, 2004 9:00 pm |
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