I am working on my business plan and I have decided to start out rehabbing sfh in my area then selling.I make a good living in my area but have a lot of debt.(bad debt ) My goal is to rehab and sell three homes in the next 18-24 month . I plan on using the proffits to pay off my personal debt (Distrubution of assetts from my llc) then i can buy rental properties to hold and not have to worry about any cash setbacks with the property since i no longer have as much debt. Or is it better to keep the money in the business and try to build the business.and just try to manage my personal debt
Considering the tax consequences of flipping vs renting I think you may want to lean toward the latter of the two. Can you purchase, rehab, and rent a couple SFH and do a refi on one to pick up your “bad debt”?
With your emphasis on “bad debt”, I assume that “bad credit” was a byproduct.
Setting aside the capital gains issues, the single greatest thing you can do for your business (regardless of whether you go rental or rehab) is to lower your cost of borrowing (IMHO).
If you invested windfalls from your deal into reducing your DTI, your scores rise and conversely, rates/terms/conditions of lending would improve or drop.
There are only three ways to maximize profit in your business; buy low, sell high and finance cheap…create improvement in any one or more areas, and your profits grow expontientally.
Regards,
Scott Miller