DISCLAIMER: Nothing in this video should be construed as legal or financial advice. The views and opinions expressed do not necessarily reflect those of my law firm or any of my business partners.
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In this video, I discuss whether flipping houses is worth it for beginners and why new real estate investors should not get into flipping houses without first obtaining some experience in the industry. I talk about the myth of the $60,000 average profit on a house flip and cover the common costs involved in flipping houses:
1. Financing Costs – hard money loans at 10% to 16% interest and 0 to 6 points.
2. Closing Costs – attorney’s fees, mortgage tax, transfer tax, title insurance, recording fees, commissions.
3. Carrying Costs – taxes, insurance, utilities, water/sewer, garbage, HOA fees.
4. Rehab Costs – even the most basic rehabs will run $20,000 or more.
5. Taxes – rehab profits are taxed at ordinary income tax rates and are not eligible for long term or short term capital gains treatment. They are also subject to both sides of the federal self-employment taxes. Taxes can easily eat up 33% or more of the net profit.
I also cover some strategies for getting into flipping as a beginner:
1. Learn everything you can about flipping by watching youtube videos, reading blog posts, listening to podcasts, and by reading books.
2. Find an experienced flipper and offer them value in exchange for their knowledge and advice.
3. Partner on a deal with an experienced flipper.