Does anyone here flip houses?

[RayH]

Heres another question that Ive been considering. I think I know what the answer is but I'll open it for discussion anyway.
What about taking on a partne? I have a friend who is also interested. He doesnt bring much money to the table but he does bring a healthy real estate background and he knows everyone and their brother (one of my shortcomings because Im relatively new to this area and not much of a people person). If it worked out, it could be a good deal for both of us, if it doesnt, you know how bad it could be.

 

[RayH]

Heres another question that Ive been considering. I think I know what the answer is but I'll open it for discussion anyway.
What about taking on a partne? I have a friend who is also interested. He doesnt bring much money to the table but he does bring a healthy real estate background and he knows everyone and their brother (one of my shortcomings because Im relatively new to this area and not much of a people person). If it worked out, it could be a good deal for both of us, if it doesnt, you know how bad it could be.

 

[CurlyDave]

Having a RE license is really an interesting question.

It would save some on commissions, both on buying and selling. The downside is that it takes time & money both to get one and to maintain it.

There is a second drawback, which is that, at least on the west coast, a seller must disclose if he/she is an agent. Whenever I see that in a listing, I immediately scratch it from consideration for purchase. Why? The same reason I won't play a pickup baseball game with people from a pro team. I know it will be priced at the top of the market, and that I am hopelessly outclassed in knowledge of the local market, and RE negotiation by a professional agent.

The only real positive is that having a license changes rentals from a passive activity to an ordinary business as far as the IRS is concerned.

 

[CurlyDave]

Having a RE license is really an interesting question.

It would save some on commissions, both on buying and selling. The downside is that it takes time & money both to get one and to maintain it.

There is a second drawback, which is that, at least on the west coast, a seller must disclose if he/she is an agent. Whenever I see that in a listing, I immediately scratch it from consideration for purchase. Why? The same reason I won't play a pickup baseball game with people from a pro team. I know it will be priced at the top of the market, and that I am hopelessly outclassed in knowledge of the local market, and RE negotiation by a professional agent.

The only real positive is that having a license changes rentals from a passive activity to an ordinary business as far as the IRS is concerned.

 

[California]

</font><font color="blue" class="small">( RayH: What about taking on a partne? I have a friend who is also interested. He doesnt bring much money to the table but he does bring a healthy real estate background and he knows everyone and their brother )</font>

One partner works his tail off, the other schmoozes and parties to keep up his contacts. That's a hard question. I couldn't stand to carry a partying fool on my back, but objectively I know I need one to provide the exposure I don't have time to create myself. That might work for you, wouldn't for me. I would gladly pay the guy a generous comission after he earned it.


</font><font color="blue" class="small">( CurlyDave: Having a RE license is really an interesting question.

... save some on commissions ...

There is a second drawback, which is that, at least on the west coast, a seller must disclose if he/she is an agent. Whenever I see that in a listing, I immediately scratch it from consideration for purchase. ... I know it will be priced at the top of the market, and that I am hopelessly outclassed in knowledge of the local market, and RE negotiation by a professional agent. )</font>

I never thought about it, but that's a very crucial point. Part of the salesmanship for getting top dollar includes letting the buyer think he can operate the rental for greater income than you did. An aw-shucks contractor looks less intimidating and more easily outfoxed than a professional broker/owner.

Still better, look like an amateurish cautious rental owner. The last duplex we lived in, in the early years, was bought by my tax preparer who saw all my records, and made me an offer out of the blue. I sold it to him for 45k over cost. He cried for years that it never appreciated a penny as soon as he bought it. Who outfoxed who?

</font><font color="blue" class="small">( The only real positive is that having a license changes rentals from a passive activity to an ordinary business as far as the IRS is concerned. )</font>

Huh? I've alwas considered my rentals as owner-managed and therefor active. I thought passive was used only for a limited partner or other situation where somebody else risks losing money before the taxpayer is at risk. What am I missing here?

 

[California]

</font><font color="blue" class="small">( RayH: What about taking on a partne? I have a friend who is also interested. He doesnt bring much money to the table but he does bring a healthy real estate background and he knows everyone and their brother )</font>

One partner works his tail off, the other schmoozes and parties to keep up his contacts. That's a hard question. I couldn't stand to carry a partying fool on my back, but objectively I know I need one to provide the exposure I don't have time to create myself. That might work for you, wouldn't for me. I would gladly pay the guy a generous comission after he earned it.


</font><font color="blue" class="small">( CurlyDave: Having a RE license is really an interesting question.

... save some on commissions ...

There is a second drawback, which is that, at least on the west coast, a seller must disclose if he/she is an agent. Whenever I see that in a listing, I immediately scratch it from consideration for purchase. ... I know it will be priced at the top of the market, and that I am hopelessly outclassed in knowledge of the local market, and RE negotiation by a professional agent. )</font>

I never thought about it, but that's a very crucial point. Part of the salesmanship for getting top dollar includes letting the buyer think he can operate the rental for greater income than you did. An aw-shucks contractor looks less intimidating and more easily outfoxed than a professional broker/owner.

Still better, look like an amateurish cautious rental owner. The last duplex we lived in, in the early years, was bought by my tax preparer who saw all my records, and made me an offer out of the blue. I sold it to him for 45k over cost. He cried for years that it never appreciated a penny as soon as he bought it. Who outfoxed who?

</font><font color="blue" class="small">( The only real positive is that having a license changes rentals from a passive activity to an ordinary business as far as the IRS is concerned. )</font>

Huh? I've alwas considered my rentals as owner-managed and therefor active. I thought passive was used only for a limited partner or other situation where somebody else risks losing money before the taxpayer is at risk. What am I missing here?

 

[Farwell]

If your potential partner is a real estate wiz he should have a bunch of money to bring to the table. I have heard many real estate "partner" horror stories, if you can swing it yourself, you will probably be better off. In a short length of time you will learn the business if you really want to. IMO. I have a mutual fund through Vanguard that is into real estate and it has been paying me over 20% in earnings per year since I have had it. A 20% annual return is not too bad for a real estate investment. The fund is called a REIT.
Farwell

 

[Farwell]

If your potential partner is a real estate wiz he should have a bunch of money to bring to the table. I have heard many real estate "partner" horror stories, if you can swing it yourself, you will probably be better off. In a short length of time you will learn the business if you really want to. IMO. I have a mutual fund through Vanguard that is into real estate and it has been paying me over 20% in earnings per year since I have had it. A 20% annual return is not too bad for a real estate investment. The fund is called a REIT.
Farwell

 

[RayH]

There is a disclosure that an agent must legally pass on to and have signed by a perspective buyer that insures the buyer knows that the selling agent is also the owner of the property.
Its true there could be some ethical issues with an agent selling their own property but its generally not a problem. Ideally, a sellers agent must always work in the sellers best interest but is also legally obligated to disclose known defects to the buyers. So there are certain ethical standards that you must meet as a licensed agent that you wouldnt have to worry about if you didnt have a license. With that in mind, all you guys that are avoiding buying from licensed agents, It may be worth considering that buying from an agent is safer than buying a FSBO. If theres something wrong with the house, they had better tell you about it or face legal recourse.

 

[RayH]

There is a disclosure that an agent must legally pass on to and have signed by a perspective buyer that insures the buyer knows that the selling agent is also the owner of the property.
Its true there could be some ethical issues with an agent selling their own property but its generally not a problem. Ideally, a sellers agent must always work in the sellers best interest but is also legally obligated to disclose known defects to the buyers. So there are certain ethical standards that you must meet as a licensed agent that you wouldnt have to worry about if you didnt have a license. With that in mind, all you guys that are avoiding buying from licensed agents, It may be worth considering that buying from an agent is safer than buying a FSBO. If theres something wrong with the house, they had better tell you about it or face legal recourse.