Forums: Discussions for entrepreneurs and small business.

Hi all finally found a site that has some worthwhile info on it. I have been unemployed for 7 months now and am rdy to start my own business. I have decided to start real estate "flipping" business. I have been in construction field on the side for the last 6 years and am confident that my lvl of expertise in contruction and cost effectiveness can turn profits on each flip. I need a little help to straighten out my thoughts on how to proceed. I feel that starting an LLC is the way to go, but am not sure if it is right because I only have around 1k to invest for start-up and as u all know thats not enough to buy, fix and sell real estate. So is LLC the way to go as far securing capitol to accomplish the first flip or is there a better way that investors will feel more secure with. I am willing to return 50% of the profits back to the investor after sale. Is this ok? Second question, how long will I have to wait to start looking for capitol and start doing the start up functions. Can I start now or do I have to wait until everything is finalized? Can I develope logos, web presence, letterhead, and all the other stuff while I wait? Any help you guys and gals can give would be greatly appreciated and if anyone does this for a living I`d love to hear from ya.

An idea for financing is using http://www.prosper.com/ to get a loan that a conventional bank will not. 

get in touch with score its free cause most likely you have to have a license and with them you will have the info.

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www.r n l landscape.org
vernonlucas@hotmail.com

I`d speak with SCORE as well, but you definitely have one, major advantage: Real product!

So many people start a business where they`re mostly selling someone else`s stuff. Personally, I think it`s easier when you`re in charge of what you make and how you make it. As a construction person, you`ll be directly involved in choosing which house to rebuild, then sell. That`s a tremendous benefit, although you won`t necessarily realize it until the business is up and going.

Will you buy these houses in your local area? What about distressed and repossessed properties, could you speak with a bank and work a deal with them? They sure as hell don`t want to hang onto a house if they don`t have to. Or how about some of those other repo` companies, where they want to get their investment back out quickly?

Hi Fraggel,

Although forming an LLC is important, I think what your investors would be looking for in a partnership will be the following:

1) How are you acquiring these properties? Are you going to have them finance rehab costs and acquisition?

2) What is your projected hold time? Houses don`t sell as fast as they did 24 months ago.

3) With a $1,000 dollars this might be the route you need to take.  Apply for a rehab loan, (make sure that you are using a broker who is knowledgeable in this field).  This way your only cost possibly is appraisal fees and hazard insurance.  In some cases, appraisal fees can be included in your closing costs.

These are just some things to think about. Cover your bases because a house that you hold can eat up plenty of your profits if you don`t have a good entry and exit strategy. 

Real estate investing is all about crunching numbers and giving yourself room to breathe when the market is slowly correcting itself.  Consider giving yourself education beyond the construction side also.

Good luck to you!

LT


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http://www.face2facevideocard.com
"videos can say it like it is"
09-21-2007

www.senatinproperties.com
real estate investments

I am in the process of "flipping" my first property as well.  There are a LOT of obstacles that one must overcome.  Here are some of the major ones:

1)  Capital: Investors typically want a predetermined return on the "loan" or "investment."  So, it may be hard to find the capital to get up and running  if you do not commit to a specific percentage of return on their principal.  Also, investors want to work with a proven system.  How are you going to convince them that you have a good strategy?  Just because you know how to do the improvement work doesn`t necessarily mean you can make any money at it.  The current real estate market is very volatile.

2) Taxation: of course the government has to get their piece of the pie.  Consider that if you do not set-up a business whose trade is something home-improvement related, you will pay capital gains taxes on any gains.  This rate is 35%.  So, if you commit to an investor that they get 50% of the "profit," I would be clear that they get 50% of after-tax profit.  Structuring your business properly can reduce the amount of your tax liability.

3)  Rehab Loans: someone mentioned rehab loans above.  There are a lot of fees that go along with these loans and they require a 3% or 5% down payment.  In addition, there are typically additional fees for closing, roughly $1500 plus 1% of the purchase price, which is on top of your regular fees to close.

4) Market Downturn: there are a lot of great buys out there right now.  This is good for someone who is a buyer, however in flipping real estate, you will soon be a seller.  So, in a month when you go to sell, there will be other great buys as well.  This leads to longer holding times for properties, which in turn is more costs.

Real estate over the years has proven to be one of the safest, most consistent ways of making money.  So, it is hard to go wrong when thinking about pursuing a business idea remotely related to the industry.  Just be smart about what you do and things will turn out fine!  Good luck.

Please e-mail nathangdad@yahoo.com as I have

an opportunity to discuss with you.

    Sincerely,

     Darwin Nunley