<p>Why is hard money lending tax advantaged? </p>
<p>There are plenty of risks with hard money lending too.</p>
<p>Like getting paid back.</p>
<p>I guess the tax advantage on invest in a company is that you buy the company’s stock instead of directly invest in company’s operation. In a way, if the stock advances in value, you make long term capital gain, however, if the profit is distributed by form of dividends, then there is not too much tax advantages.</p>
<p>Artloversplus, nice job on the flips.</p>
<p>Although my investment in a real estate fund is Self Directed IRA, I don’t need to worry about taxes. This is a private fund and profits are distributed quarterly and it ends up as a K1 from my share of the LLC at end of year. So it is taxed as income. The original investment amount stays in fund</p>
<p>To buy “shares” you would have to invest in an institutional REIT type mutual fund.</p>
<p>Here is what I can see the problem in a flipping business, other than the obvious hassles we have talked about throughout this thread:</p>
<p>“You never see your money, your money is tied in with the real estate”</p>
<p>OK, IF you use ALL OPM (ie. Heloc)to buy flippers, you may use the “profit” for personal use. But in my case, I used my own money and it is really not liquid in a flipping business. When I sell, theoretically you make a lot of money. but you have to consider keep most if not all for the next deal, because you never know the cost of the next deal. Its like in the stock market, you always try to do your best to buy the next stock to make more money after a profitable sale.</p>
<p>To use ALL OPM or full leverage to do flipping could have sever consequences: The project you buy into must be sold no matter what. When the market is crashing, you could buy and renovate at a profit. If the market is hot, you will not able to do it. And if the market is fluctuating, you might got stuck with a deal which the carrying cost became a problem. I have seen many people went bankrupt on highly leveraged deals.</p>
<p>My business model is to flip when I can, when I got stuck, I rent it out. Its all my money and no one can foreclose on me. For the same reason, I don’t buy stock on margin.</p>
<p>I agree that many investors went bankrupt buying too many properties at the top of the market with 100% financing in one form or another. I am very careful to not over leverage with borrowed funds. There’s always a cushion of cash. I could definitely lose my own money in the end.</p>
<p>My deal did not close today. It suppose to close before Christmas.</p>
<p>The bank due diligence at the 11th hour found the buyer had not disclosed all the assets in the filing and did not approve the loan. The bank considered that a fraud. So we wasted 2 months fixing the violation and sewer lateral for nothing. Anyway, everything is out of the way, the next buyer should come through ok.</p>
<p>I’m so sorry about your escrow. Do you have a backup buyer with an executed contract? Or will you start marketing the property again?</p>
<p>We had some other offers, but since this escrow went on for so long we are not sure if the other buyers are still there.</p>
<p>Happy Saturday everyone. </p>
<p>We are moving along really smooth in our escrow. The buyer did not even submit one single Request for Repair during their inspection period, although I did agree to fix some items noted in their inspection report that I felt were my responsibility and she asked if we could paint the back of the fence along the alley. I need to do 4 small repairs:</p>
<p>Ground two outlets in Living Room (missed by electrician)
Fix one outlet in bedroom (reversed polarity)
Put cover on a junction box accidentally left open in attic
Paint back of fence on alley</p>
<p>Buyer has just fully released their physical inspection contingency and has conditional loan approval already. We’re just waiting for appraiser’s final report because he couldn’t submit the final report until the garage floor concrete slab was finished. But he did indicate there was not going to be an issue coming up with the value to match the sale price.</p>
<p>Coralbrook, that is awesome.</p>
<p>Congratulations! What a huge relief this must be for you.</p>
<p>Final photos of the completed garage are on the flickr photo group. </p>
<p>The final City inspection of garage is scheduled for Monday afternoon and then I need to get termite clearance also.</p>
<p>And today a potential property landed in my lap. The landlords who own the property next door with tenants have a home nearby that is up for sale. They have been holding out at a very high price since the property is in poor condition. But he called me today and is willing to negotiate AND let me assume their small first mortgage until I renovate and sell. That would be a huge benefit for me because this home is in a high value neighborhood and I don’t have enough cash to buy it outright.</p>
<p>Went into it today for a thorough inspection. Not half as bad as this one I just finished, mostly cosmetic. Open up some walls to create a ‘great room’, kitchen and baths, flooring, paint and landscape.</p>
<p>Big issue is that it does not have natural gas. It is an ‘all electric’ 1950s house. Gas line is stubbed at property line and would have to be brought in with a lot of SDGE and City planning and permits.</p>
<p>And it begins again . . . . </p>
<p>Sounds exciting!!</p>
<p>Coralbrook - what part of San Diego is it in?</p>
<p>The new property I am looking at is on Mt Helix in La Mesa area</p>
<p>HOORAY - glad the sale is going well.</p>
<p>so, how do you “assume” their loan? Do you take title in the property or you are cooperating with the owner? When you say not enough “cash” do you mean you don’t have big enough Heloc? </p>
<p>I think to “assume” a loan now a days you need all the docs. Basically the bank is giving you a new loan, it is just equal to the old loan.</p>
<p>He offered to “wrap”, I just used the wording “assume” here. Basically I will take over the payments of the existing loan without lender knowing that ownership has changed. Haven’t bothered with the details yet because I don’t know if we are going to come to agreement on price. I’m worried that Seller will expect full price because he’s offering flexible terms.</p>
<p>Even if we don’t come to terms he has asked if he can pay for my services to plan their re-design, Color selection and style design. It was very flattering</p>