How to make a little extra money

[mdprovee]

Hey guys I need a few pointers and maybe some advice.

The wife and I are looking into buy a foreclosure house and reselling it. Make small repairs, paint, carpet, things like that, nothing to fancy. I know it sounds easy, but I am sure its not.

I am also not looking at making a killing. Pay off any original cost to us, and make like $5,000 profit. I know the housing market isn't booming like it was but has anyone done this, have any advise. Were can we find out about foreclosures, or people in trouble loan wise.

Thanks for any info.

[ViperBlue68]

Hey guys I need a few pointers and maybe some advice.

The wife and I are looking into buy a foreclosure house and reselling it. Make small repairs, paint, carpet, things like that, nothing to fancy. I know it sounds easy, but I am sure its not.

I am also not looking at making a killing. Pay off any original cost to us, and make like $5,000 profit. I know the housing market isn't booming like it was but has anyone done this, have any advise. Were can we find out about foreclosures, or people in trouble loan wise.

Thanks for any info.

Mike,

Whats up man...that 5k is after taxes your thinking right? :look: because remember any cap gains is added onto your income maybe even bumping you into a higher tax bracket..I know it did and does for me :hammer: but depending on the location and price of the house you SHOULD be able to still make a decent profit. How about you refer me those people that need help loan wise and I give you a referal fee for anything that closes? Thats easy money without the risk? :hmm:

[dropit69]

well i bought a house right across the street from me and after i fixed it up i could have made 20k in profit but my tax guy said capitol gains would kill me because i never lived in it..so im renting it for now i break even on it so the renter is paying for it..this is first one ive done so ill learn more as i go..

[mdprovee]

That is one thing I forgot about, capital gains. Thanks for reminding me.

[TonyL]

I’ve heard there is a way around the 2-year live in minimum to protect you from capitol gains. That, and if you reinvest the money immediately, you don’t get hit with the taxes as well. I think I’ve heard it called an exemption or waiver. I’m not sure.

[Bill Howell]

I’ve heard there is a way around the 2-year live in minimum to protect you from capitol gains. That, and if you reinvest the money immediately, you don’t get hit with the taxes as well. I think I’ve heard it called an exemption or waiver. I’m not sure.
It is called a 1031 exchange.There are limitations and penalties though so be careful here.
The key to any investment is be careful and do your homework. Don't rush into something that looks too good to be true, you know the old adage. Also, if I were to invest in a house to remodel, and resale I would sure as heck be looking for more than 5K profit. Way to much risk for that small of profit. Investing in rental property is a whole different animal too. Not as quick a return, but you can control your timimg on selling better. Any house that will pay for itself is a great investment-period. I have never seen one yet that decreased in value. As far as capital gains, the arguement I am reading here is similar to not buying a lottery ticket cause you would have to pay taxes if you won. WTH, give me some captial gains, and I will give you enough write offs to almost offset any tax issues. The one thing most forget when venturing into such a business is the failure to hire a good CPA. Any one worth his salt can answer all your questions and also SAVE you money at tax time, not cost you money.
Bottom line here, if you are scared, don't attempt this, it will only cause you grief. Stay at your 9 to 5 day job and hope you have enough at retirement. If you like a challenge, and got a set, jump on in, the water is great. I have been doing this for 10 years now and would hate to think where I would be if I had stuck to my normal job. Some days are good, some not so good, but either way, I am in control of my destiny, not some clueless idiot.
Ok, off my soapbox now.

[TonyL]

oh. one more thing. your "flip" house. Have a plan. A new door, some trim work, a bath remodel. (lots of marble or tile) and new, double pane vinyl windows. a quickie paintjob on the house and some common sense stuff, can make a HUGE difference.

For example. my brothers house. J.T. just refinanced it for him. Because of those things, and some landscape work, the house is worth like 70,000 more now.

[4MuscleMachines]

Also, if I were to invest in a house to remodel, and resale I would sure as heck be looking for more than 5K profit. Way to much risk for that small of profit. Investing in rental property is a whole different animal too. Not as quick a return, but you can control your timimg on selling better. Any house that will pay for itself is a great investment-period. I have never seen one yet that decreased in value.

Bottom line here, if you are scared, don't attempt this, it will only cause you grief. Stay at your 9 to 5 day job and hope you have enough at retirement. If you like a challenge, and got a set, jump on in, the water is great. I have been doing this for 10 years now and would hate to think where I would be if I had stuck to my normal job. Some days are good, some not so good, but either way, I am in control of my destiny, not so clueless idiot.
Ok, off my soapbox now.
I second Bills points quoted above. Unless that house is going to costs $10k, a $5k net profit is NOT worth it. I BORROW the money to buy nice new homes in a nice neighborhood and then rent them. I find renters in less than one month easy and have them pay the note on the home.

I can sell the houses for a tidy profit in 5 years or more. Capital gain taxes are unavoidable, but they should not deter you. If they do, then look for something else to do.

I decided to do this after doing it part time along with my full time corporate job for three years. I finally had to decide to stick to one job since I had no time left for anything else. I am glad I did it, I am responsible for my mistakes and successes, nobody else.

Maybe you can do this too?

[ViperBlue68]

The 1031 exchange will not work here for Mike because he is looking to make a quick profit...he can FLIP it and make a quick profit BUT he WILL pay cap gains on it... not only the profit on the house alone either but it could cost more because it gets tacked onto your income POSSIBLY putting you into a higher tax bracket. Bill I agree with you 110% gotta take a risk to get anywhere BUT do what is best for your situation not cause someone said too...I just bought 2 Brand new homes in April they will be done next month both have went up 45-60 k each I'm happy...the market is SLOWING big time right now though so I will hold onto these for atleast 2 years so I can avoid paying cap gains on em ....they are each owner occupied by a family member ;) ....plus they will go up even more until then....I have had alot of success in Real Estate at a young age...wish I woulda got in at a younger age.

[Bill Howell]

You are absolutely right JT. Also, different situations in different parts of the country dictate different trategies. Like I said earlier, do your homework, don't just jump into anything. :icon996:

[Damn True]

If you like a challenge, and got a set, jump on in, the water is great. I have been doing this for 10 years now and would hate to think where I would be if I had stuck to my normal job. Some days are good, some not so good, but either way, I am in control of my destiny, not some clueless idiot.


I like the sound of that Bill.
Wouldn't mind hearing more.

[toofun]

Absolutely Bill. Never base your decision on selling real estate or any other asset based on the capital gains you are going to pay. It is a general rule of thumb. First off, if you are going to buy a house and expect to put the time and effort into it only to net around 5 grand? Dont do it. It is not worth the time and effort, also if your pricing is going to put you at that figure you probably are streching it too tight. I only buy property that I figure I can net a profit of at least 30% on. And when you figure in a budget for a project. ALWAYS figure in at least 10-15% higher in the costs. Things ALWAYS come up. Dont let the real estate boom fool you. You can really get burned if you dont know what you are doing. Also remember that location is everything(location, location, location) Sometimes the cheapest price IS NOT the BEST PRICE. I would rather buy in an area that has a better market and pay MORE than a less desirable area and pay less. YOu always will make out better in the long run that way. As for me at this time I am waiting out any purchases right now. Cash is going to be KING in about 2 years. SOOOO many people buying WAY OVER their heads right now. Especially the ones that are buying with INTEREST ONLY LOANS!! What a joke!!! In an interest free loan they are figuring that the home value will continuously go up offsetting any payments they are going to have to make. While this might have been true before, now it is not. These people will end up getting caught when rates rise. AND GOD HELP YOU IF YOU GET UPSIDE DOWN on a home, or if you have to lock in at a rate too high for you to pay. It is the worst feeling in the world to have the bank call the note. It will happen and many people will be forced into foreclosure. This is where cash will be king and you can really score big time. It is aweful to think of it that way but unfortunately that is the way it works. Anyways just my .02 cents!!!!!!!

[64Comet]

toofun: I only disagree on two points. One, housing in even an average area will ALWAYS go up! Real estate, if you purchase wisely, is about the only guaranteed investment these days to gain a profit. Two, I dont really foresee the rates going up so drastically in the next few years so much so that it will cause countless numbers of home owners to foreclose. Unless you were very ignorant and bought your house $20k over its appraised value, which is extremely rare, how would this really happen? I can see it happening in extreme cases, but not in masses. Some friends and i are actually putting together a group to invest in realestate and other areas, starting out on a smaller scale of course, but in hopes to have a much larger group financial investment to get in to bigger areas of real estate. Its going to be tough in the beginning due to smaller profits per share, but i think eventually it will allow us to get in to much larger arenas where the real money is. These days in FL every one with a shack thinks their home is worth $200k, so deals are getting harder and harder to find. I have done it on my own and its very rewarding, but at this point I think we are going to be looking in to building instead of renovating.

[64Comet]

As for the finding foreclosures, banks put out lists of them. Be ready to bid war and you definitely have to be VERY educated on the area, home value, what it will take to flip and how much, versus profit.

[rob07002]

I really can't add much to whats already been said... But know what your getting into, plan for the worst, expect to be holding onto a property longer than expected, and don't go overboard with renovations... Paint, bringing house up to code and a few key details make a huge difference.. Kitchens and baths sell houses, high end "looking" counter tops, good appliance packages, nice flooring, and tile work will almost always talk to a potential buyer... As far as finding forclosures, keep this in mind it is a very competative biz, with people who do this fo a living, not for extra cash.... If its a prop worth doing, you'll def be in a bidding war with seasoned pros... Start building relationships with local Banks, and Mortgage holders, they are the once who hold the keys, and DO NOT want the property... They only forclose as a last resort, so if you can find someone in trouble but not forclosed on, them thats the golden goose, you can approch that person, buy from him direct, pay off his debt, and he we be better off without the spot on his credt report... Banks do not want to pay taxes on empty homes....

ps 5k profit IMO is not worth the trouble...
Good luck

[toofun]

Yes I agree with you but Every state or region is different at the moment. For example, per region the North East(where I am from) and parts of California have had the largest boom in home prices. Many people have paid ALOT for some of the homes. Where people get hurt is when they mortgage a HUGE amount of the home and overextend their means. Investment in real estate in the LONG RUN IS still the best investment you can make. I would never argue that point. But let me give you an example of what I am talking about.

I know some people who are carrying INTEREST ONLY loans on a 750,000 dollar home who are carrying a 600,000 dollar mortgage. They over extend themselves to get that better home and do the INTEREST ONLY mortgage because it allows them to get it. This is all well and good if your home value continues to rise at a rate that keeps up with the rate you are paying or exceeds it. BUT IF PRICES OF HOMES LEVEL OFF(2-3 year period), which is a real possibility, or worse go down AND rates rise, these people are not in the position where they are going to be able to keep up with the rates and will be in a bad situation where they either have to try and sell the home, or lock into a fixed rate(which will put their overall payment much higher than the interest only payment) This could lead to bad things for many people. You may ask why people would even put themselves in this situation but the reality is that it does happen. DONT FORGET Im talking about the people who overextend themselves using an INTEREST ONLY mortgage payments.

As far as the Foreclosure wars? You are right and you are wrong. By the time foreclosures hit the NEWSPAPERS OR LISTS, They have already been passed over by countless people on A lists in the bank. I for one have gotten many opportunities thrown my way via this method. If you do business with a certain bank, it is not uncommon for them to contact you regarding certain properties that will be coming up on default.Why? Because a bank is looking to get out of a bad debt and who better to help them out than someone they have a relationship with already that they know is solid financially. Last thing a bank wants is another bad debt on their hands. It works the same way with alot of mortgage companies and especially lawyers who do alot of mortgage work. Sad but it is true... the old saying "its not what you know but who you know" still stands true....

Mark
TOOFUN

[mdprovee]

Thanks guys for the excellent advice. I will listen to it all. We are just looking into posiblities, as my wife has started working for a real estate broker and sales ofice. We are going to be talking with her boss also, and have a meeting with a financial person. They are definately more informed than I am, as are alot of you.

The 5000 profit number was just an exageration of not trying to make a killing, just make a little extra money. I know not to risk thousands for pennis profit, at least I hope I do. Keep any suggestions coming and Thanks again.

[96Z28SS]

I think you should start a company and do it under a company name or a reality trust.