Can Flipping Be Integrated Into A Prudent Purposeful Plan?

Posted @ 11:30 pm - Filed under 1031 Exchanges, Capital Growth, Goals, Purposeful Planning, Real Estate Investing

Well, yes and no. If yer talkin’ fixers, and you have the experience and expertise, go for it. I’ll show you how to blend your efforts into a Plan designed with your talents in mind. If it’s not a fixer, but for any of the many possible reasons you’re able to buy way below market, and it’s not in a stoopid bad area, ditto.

As said here many times, buying/selling for quick profits isn’t in and of itself, bad. But it is imperative to understand the long term problems with buying/fixing/selling as a modus operandi. Well, there’s only one problem. Or, maybe it’s not a problem for you. Are you OK with workin’ on fixers ’till you croak? ‘Cuz that’s yer future if that’s all yer doin’.

Look, let’s use your fix up talents to your advantage. First, and most crucial, is to begin to think long term. That one fundamental change in thinking will have a turbo charging affect on your long term capital growth, and therefore your ultimate net worth. Oh, now I have your attention. Hey, whatever floats yer boat.

Here’s what you may wanna consider.

You find a fixer for $150,000 knowing (yeah, sure) it’ll cost $20,000 to fix. Comps, as much as you can rely on them these days, say you can still be low man on the totem pole, while making a solid profit. So far, so good. Now, when you’re finished, resist the urge to grab the ‘For Sale’ sign. Grab a cool one from the fridge, and think this one through.

So now you’ve got yourself a $250,000 home. Since you bought it with 10% down, you owe a tad less than $135,000. You can rent it for about $1,250/mo +/-. You’ll break even more or less. Now all you need is for time to pass — about a year. Let me rephrase that — at least a year. Now yer eligible for long term capital gains treatment. What does that mean to you? Way lower taxes, that’s what.

Let’s say the value didn’t go up a penny in that year. So what? You don’t care, ‘cuz here’s what you can do. Why don’t you, instead of selling and paying the taxes, execute a tax deferred exchange, and defer the taxes altogether? You’ll net about $96,500 after costs of sale. Now you have some pretty cool choices you haven’t had before, ‘cuz you’ve created a nice lookin’ place.

You can do any one of a dozen things not available to you before. We’ll talk about this later. But here’s what you wanna take away from all this.

By waiting a year, the least you’ve done is significantly increased your after tax profit. There are several potential Plans for the real estate investor with the skill set to blend fixers into their Plan’s script. It can literally take years off the time it’ll take to accomplish your goals.

Here’s a little example.

If you waited the year, and decided to execute a tax deferred exchange into well located growth region properties, you’d be able to kick some major bootie. How ’bout going from a $150,000 fixer to over $750,000 of very cool, not to mention new or near new income property? That’s just a small slice of the tasty pie awaiting those who know how to leverage there ‘handyman’ skills properly. There are at least seven more slices in that pie.

The folks who do exceptionally well at anything, investing in real estate included, are the ones who go to battle with more knowledge than the other guy. It’s the Purposeful Plan that allows you to multiply your skills at a more rapid pace than most experience. There’s not much out there that will beat superior knowledge, experience, and expertise when tied to an excellent Purposeful Plan.

Later on I’ll be talkin’ about more of these slices. The thought I want you to take away from all this is that there are answers I’ve given here for which you didn’t know the questions. Think about that. How many more questions are there? It can be overwhelming, but it need not be. Don’t get me wrong — this ain’t rocket science no matter how ya slice it. Well it isn’t if you know what yer doin’ and yer gettin’ all the answers to all those questions you don’t know to ask.

Your next step? Call me silly, but I’m thinkin’ it’s calling or emailing my Bawld self. We’ll figure out what’s possible for you, given what you bring to the table.

This entry was posted on Wednesday, July 9th, 2008 at 11:30 pm and is filed under 1031 Exchanges, Capital Growth, Goals, Purposeful Planning, Real Estate Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.