First off, here is a little back-story on myself in general. I am 22 years old and currently working in a shipping department, although its not terrible, I wouldn’t consider it a career path. I also operate a side business buying and selling motorcycles, which has proven to be a successful venture over the past few years. I have always thought about getting into real estate, but hadn’t done much research until recently when my fiancé and I decided to buy our first home. After searching for a couple of months we decided to build a house. Since my father has been in the trades his entire life, I’ve learned a lot over the years. Doing our own work, along with getting great deals on everything due to the economy, enabled us to get more for our money. Anyway, I have started to research the possibility of rehabbing houses as a business opportunity. Since I have the know-how to do most of the work myself, and I’m no stranger to finding deals from my experience with my side business, I think I could be a great candidate to get into this type of investing. I was hoping I may run into some people here that could steer me in the right direction to further research this idea.
My idea was to start with a lower price range home (<$100k), then just finance it through my fiancé’s credit. I have about $20k liquid for this venture, although I could free up a bit more capital if it was necessary. If anyone has any input on how much money it takes to get started in all of this, it would be much appreciated.
Also, are there any websites/forums/books you guys would recommend that would be a good resource for the type of investing I’m looking at? There is a lot of information out there, I figure I should search it out as efficiently as possible.
Yes I have heard the taxation is quite ridiculous. Then again, so is the tax burden on most small-business ventures. For some reason the government doesn’t realize its the small businesses that drive the economy.
The long term goal for me is to move into the rental side of things after I generate enough capital to start buying properties outright.
My plan to start this venture is to rehab my first property while I’m still employed, to test the waters so to speak. Assuming I am successful with my first deal, move into rehabbing full time after I find my second property to rehab. Unlike a lot of people that move into this market, I’m not starting off with a very high paying job to begin with, so I don’t really need to see that much success to clear the amount I’m making now. I think this will make it easier for me to make the jump to doing what I would like to full time.
Which brings me to the question, are my goals realistic? Is $20k enough cash on hand to start my first deal? For the people that have some experience rehabbing, what would your conservative estimate be for the amount of profit to expect per project?
True that you may not need to make much to replace your current income because you’re not making a whole lot right now, but the flip side is you don’t have much income to draw from if you go over budget on your rehab.
It’s hard for others to estimate profit for houses in your market. You will have to learn your market to figure out what the ARV of the house is when rehabbed to a certain level of quality. You have to know what houses are selling for and then look at how much it will take to buy it and what work you’ll need to do.
I rehab for rental where I am. I can buy houses for 20k here, put 3-5k in them, but then they still may only be worth 30k to resell. Not worth my time to do what I do for resale. I look long term by having the rent pay down the note.
Interesting points Justin. I see what you are saying about my income having pros and cons so to speak. Ideally I wouldn’t go super over budget, but even in that case I do have a safety net. When I say I have $20k liquid, I don’t mean that is 100% of my money. Although I do realize the numbers add up quick in housing, I learned that first hand building my current house.
I find that surprising you can get houses for $20k in your market, that is a crazy low number. The price range I’m looking at would be in the 50k-75k range. I would be financing most of the purchase of course.
Can’t you offset some of your profits from rehabbing/flipping by holding the flips in the same llc as rentals? There has to be some creative ways to shelter that income from taxes. 45% of your profits is huge and discouraging.
Anyone with experience being labeled as a “dealer” have any tips to avoid such high taxes?