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Old 01-27-2019, 09:33 PM
 
Location: Iowa
858 posts, read 501,568 times
Reputation: 588

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I recently took an early retirement and had a windfall due to a death in the family. While searching for a new home for my family I came across a property at auction and was able to purchase it for $15K. Comps in the area are $100K. I've done construction in the past so I will be doing a lot of the work myself, hoping that will increase profit considerably.


If this one goes well I'd like to do more in the future...figure it will keep me occupied in "retirement". My question is, should I flip under a business? I'm asking mostly for tax purposes. Also, it would seem more "stable" if it went through a business and I payed myself a salary, but I'm not sure if it would work that way...which is why I'm asking. FWIW, the property is in Illinois and I live in Iowa if that has any relevance.


Any advice is greatly appreciated!
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Old 01-27-2019, 10:26 PM
 
102 posts, read 17,635 times
Reputation: 277
First thing tomorrow, go get a CPA.

Second thing, call a realtor and sell.
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Old Yesterday, 08:02 AM
 
Location: Raleigh NC
8,255 posts, read 6,496,916 times
Reputation: 7251
Quote:
Originally Posted by Robeaux View Post
I recently took an early retirement and had a windfall due to a death in the family. While searching for a new home for my family I came across a property at auction and was able to purchase it for $15K. Comps in the area are $100K. I've done construction in the past so I will be doing a lot of the work myself, hoping that will increase profit considerably.


If this one goes well I'd like to do more in the future...figure it will keep me occupied in "retirement". My question is, should I flip under a business? I'm asking mostly for tax purposes. Also, it would seem more "stable" if it went through a business and I payed myself a salary, but I'm not sure if it would work that way...which is why I'm asking. FWIW, the property is in Illinois and I live in Iowa if that has any relevance.


Any advice is greatly appreciated!
1. I can't see the need for a corporation until it's an actual business. Your first flip isn't yet a business.
2. How far away from you is the home.
3. What work will require permits in IL or the municipality, and what won't?
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Old Yesterday, 08:21 AM
 
Location: The Triad (NC)
27,475 posts, read 59,447,551 times
Reputation: 30364
Quote:
Originally Posted by Robeaux View Post
Any advice is greatly appreciated!
Twenty years ago... even ten... gets a different answer than today.

That difference ranges from the immediate economic & market situation,
the number of very well heeled pro's who have gotten into the work,
through the changes in codes and permitting/inspection standards.
In all, it leaves little to recommend the hobby (even with my son in Iowa City).
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Old Yesterday, 08:25 AM
 
Location: Miami-Jax
5,996 posts, read 6,583,498 times
Reputation: 3265
LLC. Lots of tax deduction benefits. Incorporation, as mentioned above, is not necessary for the benefits until you have significant and steady revenue.

Anyway, you want to talk to people in your area to get advice. CPA and/or lawyer as well.
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Old Yesterday, 09:25 AM
 
302 posts, read 156,705 times
Reputation: 494
Go to a lawyer and set up an LLC. The liability is the reason: you don't want your own home and income at risk.
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Old Yesterday, 09:52 AM
 
1,742 posts, read 678,185 times
Reputation: 1838
There are no tax benefits. Your income and deductions would work the same way as if you filed normally. Paying yourself a salary would be taken out of the income from the home(s), which would make no difference in how it its taxed.
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Old Yesterday, 10:46 AM
 
3,406 posts, read 7,417,826 times
Reputation: 4225
Quote:
Originally Posted by Robeaux View Post
I recently took an early retirement and had a windfall due to a death in the family. While searching for a new home for my family I came across a property at auction and was able to purchase it for $15K. Comps in the area are $100K. I've done construction in the past so I will be doing a lot of the work myself, hoping that will increase profit considerably.


If this one goes well I'd like to do more in the future...figure it will keep me occupied in "retirement". My question is, should I flip under a business? I'm asking mostly for tax purposes. Also, it would seem more "stable" if it went through a business and I payed myself a salary, but I'm not sure if it would work that way...which is why I'm asking. FWIW, the property is in Illinois and I live in Iowa if that has any relevance.


Any advice is greatly appreciated!
If you are going to use mortgage loans, and own several properties: The manner in which buy-and-holds will count against you in your debt ratio (as personal liabilities) can only be solved if the properties are held by LLCs AND you file business Tax returns. So the route of W2-ing yourself, with the properties held within the LLC is smart if you plan to do this long term. Business Bank accounts, also.
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Old Yesterday, 12:04 PM
 
9,666 posts, read 11,559,783 times
Reputation: 12967
This is a 15K to 100K flip........don't bother with an LLC/paperwork hassle.
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Old Yesterday, 01:35 PM
 
Location: Fort Lauderdale, Florida
8,448 posts, read 7,751,670 times
Reputation: 18015
Chances are, and depending upon your market, if a house sells for $15K in a neighborhood full of $100k houses, it needs $85k worth of work to just bring it to code.

I would instead concentrate on bringing it to code and turning it into a rental property.

There are tons of people out there that have been successfully flipping houses that weathered the economic downturn that have tons of experience that did not buy this house.

There is a reason.
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