Flipping houses - how to get finance?

[Johnyx]

Hi AllI have been considering flipping houses. I have a carpenters background, and think I could do it quite well. But I have a question...

Lets say I found the perfect house for renovation...I then quit my job to do it up. But how on earth do you get a mortgage to do it up and sell it for profit, if you dont have a job? Banks wont lend without an income will they?
Thanks in advance for any replies....

[donna]

Hi Johnyx,

Why quit your job? Do the renovation around your work. Better you give it a go before throwing your job away. Also there's a lot of tax stuff you need to be across too as it will be a business and you'll pay Capital Gains Tax. I'm seeing tradies moving house, - finding a do upper doing it up and selling it on and starting over. Not sure how many they could do before being napped tax-wise for the activity but it's happening for sure.

cheers,

Donna

[Johnyx]

OK, thanks, but I have Done renovation part time before and it sucks. Was curious to see how others do it, as I know some of them do it full time. Was more curious about how they organise finance...

[Rosco]

Hi Johnyx,

Why quit your job? Do the renovation around your work. Better you give it a go before throwing your job away. Also there's a lot of tax stuff you need to be across too as it will be a business and you'll pay Capital Gains Tax. I'm seeing tradies moving house, - finding a do upper doing it up and selling it on and starting over. Not sure how many they could do before being napped tax-wise for the activity but it's happening for sure.

cheers,

Donna

Small thing, there isn't capital gains tax!

But you can be taxed under lots of other provisions such as subdivisions, intention, rezoning, builder rules, tainting.

IRD have recently put out some information about people who regularly buy, do up and sell their own home (or buy section, build and sell), so they are trying to tax these more!

If you go ahead I would suggest you get some expert advice from a property accountant
- Structure
- Tainting
- GST and zero rating
- Tax
- Basic numbers (no point trading if you don't make profit!)

Ross

[OnTheMove]

I would keep your job. Yes it sucks, I did it in Qld for years.

BUT, not being able to get a loan sucks more.

Ultimately you need to get enough equity +50% lets say, on the median house price in cash before you can even think of doing it as a job, keep in mind you will be taxed if you sell. keep in mind NZ house prices could tank should you not sell (due to over inflated house prices and economic pressure).

I would keep your job and just take longer if need be. Also remember, never do work you are not good at, ie tiling. And never do plumbing or electrical s unless that is your qualification.

[MaddyBlu]

Our plan originally was to use our trading business as income for bank lending; since we're paying ourselves through the company + profits. I think they no longer allow this because trading/developing is deemed too unstable currently (someone correct me if i'm wrong please).
So we've had to make life changes to ensure a flexible full-time/day-job while working on trading almost full-time as well. I'm an Architect so I kinda work all over the show which helps a lot.
My advice is to not quit your day job, just give it a go first and then you'll work something out.
The first thing to do is to get your tax structure sorted!!!

[OnTheMove]

Our plan originally was to use our trading business as income for bank lending; since we're paying ourselves through the company + profits. I think they no longer allow this because trading/developing is deemed too unstable currently (someone correct me if i'm wrong please).
So we've had to make life changes to ensure a flexible full-time/day-job while working on trading almost full-time as well. I'm an Architect so I kinda work all over the show which helps a lot.
My advice is to not quit your day job, just give it a go first and then you'll work something out.
The first thing to do is to get your tax structure sorted!!!

Word. And man I wish I had switched to Architecture from IT Was my passion but the Aussie QUT Architect head told me Id never earn the same money. She had no Idea my plan was to use it for knowledge on residential developments. Too old to go back to uni now.