SimpliSafe is award-winning home security that keeps your home safe around the clock. It’s really reliable, easy to use, and there are no contracts. Check out SimpliSafe here: https://simplisafe.com/Graham Add me on instagram: GPStephan
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Now here’s the first reason I don’t flip properties: It’s a LOT of continuous work.
For example, it’ll usually take me about 3-6 months of work just to find ONE property that’s worth buying. I’m a lot more conservative when than most investors, because when I buy something, I KNOW I’m making money on it - I build in a large enough buffer and margin for error that even if the market goes DOWN, I’m still coming out ahead. And finding these deals takes a lot of time.
Secondly, if I WERE to flip a property, what a lot of people don’t realize is that the profit you make is taxed as ordinary income, not long term capital gains tax.
And this is where it gets rather nuanced…the IRS classifies that anyone who’s buying a property in an act to resell it for profit, your profit could still be counted as ordinary income. However, according to the IRS, you’re now an owner-user, and you can sell that property for up to a $250,000 gain if single, and a $500,000 gain if married…completely tax free. So I could “flip a property”…by just living there for two years…and then make that $100,000 profit TAX FREE just by living there instead of flipping it immediately. The more you know.
In addition to that, you also have CLOSING COSTS that will eat into your profit anytime you sell.
I’m going to pay about 6% in closing thats…that’s escrow, title, and insurance fees, as well as Realtor commissions.
Now the THIRD reason is that, when flipping property, market timing is a HUGE factor in what you can make.
When the market is consistently going up every month, it’s a GREAT time to flip real estate. But given the nature of flipping real estate, how time intensive it is, and how much work goes into it…most of the time, you can’t afford anything to go wrong. Often, if the market goes DOWN during the time you buy it - you’ll begin working JUST to break even on your investment, and sell it without losing money.
On the other hand, RENTS tend to be a LOT more stable…even if the market goes down, usually rents stay about the same. This means on a rental, I can much more easily estimate what my monthly profit would be over the next few years - than I could guess what property values would be by the time I want to sell.
So with that said, the FOURTH reason I don’t flip properties is because it would take my time away from my main focus, which is working as a Real Estate Agent and making these YouTube videos.
I’m the type who LOVES to avoid stress and obligation. I don’t want more on my plate, I don’t want more on my mind, I don’t want the pressure of needing to make sure everything goes as planned…I love the set-it-and-forget-it mentality, where I can pick up and go anytime I want without worrying about what contractors are doing, or concerning myself with where the next deal is coming from. That’s just me, other people love the constant hustle…I don’t.
And finally, I believe that when you DO buy a property like that, where you can fix it up, and it has THAT much equity in it where you can flip it for a property, chances are, you can just rent it for a higher amount than you could before.
This has been my mentality for every single property I’ve purchased. When you run the numbers, too…depending on your tax bracket..sometimes you’ll actually end up with MORE money by doing a cash out refinance than you would SELLING the property and paying ordinary income taxes on it. So you’ll actually make MORE NOT selling it, than you would by selling it…how crazy is that.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://bit.ly/2STxofv $100 OFF WITH CODE 100OFF (Limited Time Only)
Now here’s the first reason I don’t flip properties: It’s a LOT of continuous work.
For example, it’ll usually take me about 3-6 months of work just to find ONE property that’s worth buying. I’m a lot more conservative when than most investors, because when I buy something, I KNOW I’m making money on it - I build in a large enough buffer and margin for error that even if the market goes DOWN, I’m still coming out ahead. And finding these deals takes a lot of time.
Secondly, if I WERE to flip a property, what a lot of people don’t realize is that the profit you make is taxed as ordinary income, not long term capital gains tax.
And this is where it gets rather nuanced…the IRS classifies that anyone who’s buying a property in an act to resell it for profit, your profit could still be counted as ordinary income. However, according to the IRS, you’re now an owner-user, and you can sell that property for up to a $250,000 gain if single, and a $500,000 gain if married…completely tax free. So I could “flip a property”…by just living there for two years…and then make that $100,000 profit TAX FREE just by living there instead of flipping it immediately. The more you know.
In addition to that, you also have CLOSING COSTS that will eat into your profit anytime you sell.
I’m going to pay about 6% in closing thats…that’s escrow, title, and insurance fees, as well as Realtor commissions.
Now the THIRD reason is that, when flipping property, market timing is a HUGE factor in what you can make.
When the market is consistently going up every month, it’s a GREAT time to flip real estate. But given the nature of flipping real estate, how time intensive it is, and how much work goes into it…most of the time, you can’t afford anything to go wrong. Often, if the market goes DOWN during the time you buy it - you’ll begin working JUST to break even on your investment, and sell it without losing money.
On the other hand, RENTS tend to be a LOT more stable…even if the market goes down, usually rents stay about the same. This means on a rental, I can much more easily estimate what my monthly profit would be over the next few years - than I could guess what property values would be by the time I want to sell.
So with that said, the FOURTH reason I don’t flip properties is because it would take my time away from my main focus, which is working as a Real Estate Agent and making these YouTube videos.
I’m the type who LOVES to avoid stress and obligation. I don’t want more on my plate, I don’t want more on my mind, I don’t want the pressure of needing to make sure everything goes as planned…I love the set-it-and-forget-it mentality, where I can pick up and go anytime I want without worrying about what contractors are doing, or concerning myself with where the next deal is coming from. That’s just me, other people love the constant hustle…I don’t.
And finally, I believe that when you DO buy a property like that, where you can fix it up, and it has THAT much equity in it where you can flip it for a property, chances are, you can just rent it for a higher amount than you could before.
This has been my mentality for every single property I’ve purchased. When you run the numbers, too…depending on your tax bracket..sometimes you’ll actually end up with MORE money by doing a cash out refinance than you would SELLING the property and paying ordinary income taxes on it. So you’ll actually make MORE NOT selling it, than you would by selling it…how crazy is that.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
If you lived there for two years and then leave I think you have a three-year window in which you can sell it and will not be subject to income tax. Is this correct? I did not hear you mentioned this
🆗️
62 year old man from phoenix. I took the profits from my business and bought rental homes, in nice area’s. I started 34 years ago. I have a couple dozen paid off now. Homes I payed $120 k for in 1986 are worth $450 k now . Location location location. Too much work in a fix and flip. In most cases the property is too high priced to be a rental, so if you can’t sell it, you have a $500-800 k home not made to rent. Main problem is nobody knows when the market gets stale , and you can’t sell the house.
what if you buy multiple houses rent them for two years and then fix them up and then sell them you would have both rent got from two years and profit from a flip and since the house would most likely increase in value if you picked it well you would have a larger profit
Wait he spent more than he earned☹️
Hey graham, would you consider flipping houses in a different location, like texas where there isn’t a state income tax? Or would you not recommend it?
I just wonder why all these flippers making "millions" are so focused on making youtube channels on how they make "millions" and want to give up all their secrets. It almost seems like they know they can make more money on youtube by getting subscribers. Why would you even bother with Youtube which would automatically create competition. It doesn't make any sense.
Tfliktp kliktilkliktigliktptiloptflikt
So you and MeetKevin need to have a talk
You should do a video on “should you sell your primary residence home or rent it out”
I got my own simply safe..my shotguns 🇱🇷👍
its like he totally gets me!
Great info, thank you.
Would you consider the BRRRR Method over a flip ?
Is that Lacoste shirt genuine?!
"Set it n forget about it mentality" love this… investment 101
KICKFLIP A HOUSE
Graham Stephan you are a great person in teaching personal finance advice.
Right on. I buy fix and rent for long term. Screw flipping.
I love how he leave his car at the background to use it as a tax write off and because it's his garage.
You never want to tell what security system you have. Especially the systems marketed to consumers. They work but they are not safe
What's the name of that software you were using in the video?
I really liked this video, anything having to do with investing in property and being a real estate agent is good.!! I like the idea better of holding real estate and renting out vs.flipping. I appreciated learning about saving tax money by keeping the property. Have been starting to research more about how to save money and not pay as much taxes. I am a real estate agent in southern Illinois, I bought the house next-door to me in a tax sale for $1051.50 in a (Silent auction). The home has good bones but I’m thinking it might cost me 16,000 to renovate. This is my first property to work with fix up to rent. I am just excited and looking forward to getting this property going.!! 🙂
Is flipping real estate like short term trading stocks? … it eerily feels that way.
Also, flipping house works WELL if you are doing it in low cost area… Austin TX is not exactly the lowest cost living area, but it's still cheaper than NYC/Seattle/Bay Area for sure. Hence why AustinFlipper can make money off it it. Plus they run a business with perhaps 5-10 properties at a time! They aren't doing it one property at a time…